Why Is SoundCloud Focusing on Brazil?

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Couple choosing music from smartphone, Arpoador beach, Rio De Janeiro, Brazil

News came out yesterday that SoundCloud had secured a strong hire, bringing Sonia Flynn -- most recently the head of Facebook's Dublin office (also the company's European headquarters) as well having played a key role in Google's launch in Ireland -- as its new vp of international, a position created for Flynn. She is charged with "identifying, assessing and executing on new market opportunities."

Her "background in language," as she told the RTE three years ago (she holds a degree in applied languages) and deep tech experience will no doubt be crucial in SoundCloud's next phase, which it says is "to create and enable local communities." To that end, the company announced that its first move towards more intimate localization will be the platform's integration of Brazilian Portuguese (though no Brazilian email support off the bat, the company lamented).

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So why Brazil? Why not a larger market, like SoundCloud's home country of Germany, where the physical market dominates (leaving a lot of room for digital growth) and where the overall value of stands at $1.4 billion, opposed to Brazil's $246.5 million?

The simplest explanation may be that, instead of fighting an uphill battle against the dominance of physical in Germany, SoundCloud is looking to better familiarize itself with a quickly growing, if smaller, digital market. Ad-supported streams in Brazil rocketed in value recently, from $17.4 million in 2013 to $30.9 last year. Ad-bolstered plays are something SoundCloud has been slowly dipping its toes into since last year, though ads have, anecdotally at least, been slow to appear, it is much more likely in a country whose per capita gross national income is $11,690 according to the World Bank that streaming would be advertising-supported, as opposed to subscription-based. The growth in ad-supported streams obviously supports this. (This also came up in Billboard's discussion with David Strauss, co-founder of the Music Messenger app, which is seeing fast success by focusing on developing markets.)

As well, the country's overall market was up two percent last year on the strength of digital; physical revenues sunk by $18.5 million, while digital jumped up $21.8 million. Additionally, mobile personalization -- a strong suit for SoundCloud -- was up by nearly $2 million.

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SoundCloud may have some trouble providing Brazilian listeners exactly what they want -- according to the IFPI's most recent Recording Industry In Numbers report, the top ten albums in Brazil last year were all local repertoire, and half of those were owned by Sony -- which just pulled its music from the service a week ago. But, as sources told Billboard last year, catalog isn't where SoundCloud's value lies -- 80 percent of uploads are user-generated.

The company may know something we don't -- a request for more information on the platform's performance in Brazil was denied. So it could be seeing even stronger numbers than the above. But even if it's not, Brazil is clearly a ripe petri dish for a new strategy.