Will Music Streaming Firm Spotify Connect With SoundCloud? - TheStreet

In the highly competitive digital music streaming industry, Spotify continues to give upstart rival Apple (AAPL) - Get Report a run for its money.

And now the Swedish group is reportedly looking to acquire SoundCloud, of Germany, to gain a service akin to an audio version of Youtube.  The Financial Times reported early talks between the two companies but noted it was unclear how Spotify would pay for the purchase and that the deal could still fail. The report cited "people briefed on the discussions."

Spotify could not be reached immediately. SoundCloud said it does not comment on speculation.

Founded in Stockholm in 2006, Spotify offers music, podcasts, and videos online from a wide range of record labels and media companies. It is headquartered in London.

Meanwhile, Berlin-based SoundCloud offers a platform for users to record, upload, and share sounds online. Founded in 2007, SoundCloud was also originally based in Stockholm.

The report comes as Apple  belatedly attacks the music streaming market and  seeks to grab audiences away from the Swedish early entrant. Paid subscribers for Apple Music, launched in June 2015, reached 17 million, CEO Tim Cook announced this month. Spotify, which has seen subscriber numbers expand from 500,000 to 40 million over the six years, added 10 million subscribers in the last six months alone. Amazon (AMZN) - Get Report is also reportedly planning to launch a streaming service, while Alphabet (GOOGL) - Get Report already offers Google Play.

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The challenge for the music streaming industry has been how the players can make money out of a business which offers a substantial volume of content for free. According to Internet statistics company Statista, Spotify has consistently been in the red despite enjoying revenue growth. In 2015, it booked a net loss of €173 million ($194 million) on revenue of €1.9 billion, according to the data.

Spotify is one of the few European "unicorns," or startups founded in 2000 or later and valued over $1 billion. According to Crunch Base, the company has raised $1.56 billion in equity through eight rounds from 27 investors, which include Goldman Sachs and Accel Partners.

Its revenue comes from advertising and paid subscription services. While free users must listen to advertisements and face certain limits on mobile devices, paid customers have unlimited access to the services. Spotify offers subscriptions for $9.99 a month. That's the same price as for Apple Music. 

Meanwhile, SoundCloud has raised $193.32 million in equity in six rounds from 10 investors, according to Crunch Base.