Twitter wipes out its $70m investment in SoundCloud

Twitter’s 2017 annual report showed that it has lost most of the money it invested in SoundCloud in 2016.

It had to write-off $66.4 million of the $70 million it had pumped into the free music streaming company, according to the filing.

Twitter had been in on-and-off talks to acquire SoundCloud for years.

Instead it hankered down $70 million as part of  a $100 million round of fund raising. At the time, SoundCloud was valued at $700 million.

But SoundCloud ran into patchy waters, and by mid-2017 saw its value drop to $130 million, which saw it axe 40% of its workforce and close its Australian operations.

In August 2017 when the Raine Group and Singapore’s Temasek came in with $170 million, it had a few conditions.

One was a restructure of SoundCloud’s corporate set-up, which not only saw the exit of founding CEO Alexander Ljung but wiped out many of its early investors.

In its filing, Twitter acknowledges that "The carrying value of this investment was not expected to be recoverable within a reasonable period of time.”

The write-off is not inconsiderable, but Twitter could afford to take such a hit after generating US$2.4 billion revenue, and $4.4 billion USD in cash and short-term investments by the end of 2017.

So far Twitter’s dabbling with the music industry has not been a happy one.

A dedicated music app stopped production just a year after its launch.

SoundCloud which avoided closure has repositioned itself in the heavily competitive streaming market.

It has moved from its $10-a-month subscription and launched a limited $5-a-month plan to music creators, producers and other prosumers.

Its CEO Kerry Trainor announced earlier this month the service would expand its payment program to “hundreds of thousands” of artists.