SiriusXM Acquires Minority Stake in SoundCloud With $75 Million Investment

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The logo of the music streaming service SoundCloud is displayed on a smartphone on Jan. 16, 2019 in Berlin, Germany. 

SiriusXM announced Tuesday that it has invested $75 million in audio platform SoundCloud, which will use the infusion to enhance its existing services and accelerate product development. According to the terms of the agreement, SiriusXM purchased the investment amount in securities and will now have a minority stake in the Berlin-based company along with two seats on SoundCloud’s expanded board of directors.

SoundCloud already has a working relationship with SiriusXM subsidiary Pandora, which has been handling U.S. advertising sales for the buzz-creating platform since last year. That pact allows SoundCloud to tap into Pandora's direct sales capabilities, sea of data and audio marketplace to allow brands and advertisers the ability to purchase its U.S. ad inventory directly. 

Formerly on the brink of Chapter 11, SoundCloud has achieved stability in recent years thanks to three main sources of revenue: creator products/services, consumer subscriptions and advertising. It also benefitted from a $169.5 million round of funding in 2017 from Raine Group and Singapore-based investment company Temasek.

SoundCloud hosts over 200 million unique tracks by 25 million creators across its various tiers, including a free version and a premium, ad-free service for listeners. It also has various paid services for creators.

SoundCloud noted that it had a banner year for engagement, revenue and subscribers, as well as "creators heard," over the course of 2019. The company also said it reached a $200 million "forward revenue run-rate" in the fourth quarter, a first.

CEO Kerry Trainor cited SoundCloud's "creator-led growth strategy" for its resurgence.

"We have an exciting roadmap focused on deepening the connections between creators and listeners that fuel creator discovery, career growth and the evolution of music culture on SoundCloud," Trainor said. "We've built a great relationship with SiriusXM through our highly successful Pandora ad sales agreement, and their investment gives us added capital flexibility to accelerate our vision and take advantage of strategic opportunities as they arise."

Added Jim Meyer, CEO of SiriusXM: "SoundCloud’s unique platform serves a vital role in today’s music ecosystem where new artists are discovered and build their fan base, and established artists experiment and connect directly with their fans in highly effective ways. We admire SoundCloud’s loyal and growing audience, its offering for creators, and its reputation and popularity in global music communities. We believe this is another opportunity to continue creating value for SiriusXM stockholders by investing in expanding digital audio platforms."

The Raine Group served as financial advisor to SoundCloud, and Morrison & Foerster as its legal counsel. Allen & Company LLC served as financial advisor to SiriusXM, and Weil, Gotshal & Manges LLP as its legal counsel.