Spotify Reportedly Backs Away From Buying SoundCloud As It Prepares To Go Public

Back in September, it was reported that Spotify was in “advanced talks” to acquire SoundCloud. However, an anonymous source has revealed that the music streaming giant has now backed out of purchasing SoundCloud as talks between the two companies ended earlier this week.

An insider indicated that Spotify backed away from buying SoundCloud since the company feared that the acquisition could have a negative impact on its plans to open its stock to the public, according to TechCrunch. Rumors are going around that Spotify might move forward with its IPO (initial public offering) plans some time in 2017.

TechCrunch’s source added that Spotify “doesn’t need an additional licensing headache in a potential IPO year.” This refers to the costs of negotiating licensing deals with music labels, something that’s of high importance for SoundCloud. Although SoundCloud might not be the top music streaming service at the moment, it’s the service with the most number of tracks. The service is known for providing a platform for independent musicians. SoundCloud was last valued at $700 million.

Spotify reported this past summer that it passed 100 million users with 40 million of those paying for a monthly subscription. Many believed that Spotify wanted to acquire SoundCloud in order to make its catalog of music larger, while potentially increasing its number of paying subscribers. This could have been the company’s response to its competitors like Apple Music, which just hit 20 million subscribers this week, as reported by IBT yesterday.

With Spotify abandoning plans on purchasing SoundCloud, the company may have recognized that the deal’s cost would be far greater than the benefits. For the last 10 years, Spotify has also failed to generate a profit due to its expensive licensing deals, according to the Financial Times. Focusing now on strengthening its finances appears to be far more important as it prepares its IPO next year.