One of the last remaining walled-off areas of music was set free on Thursday. Both Apple Inc.’s (NASDAQ: AAPL) Apple Music and privately held Spotify began offering unofficial, single-track remixes on their respective streaming music services. Until then, only Germany-based SoundCloud offered these user-uploaded mixes that major record labels wanted no part of.
According to a report at TechCrunch, the two services struck deals with music rights management firm Dubset, which uses proprietary technology to scan an entire mix and match every part of the track to music snippets based on an audio fingerprinting technology from Gracenote. The samples are matched to the snippets, and Dubset collects the royalties due and distributes it to the original rights holders.
This may be good news for subscribers to Apple Music and Spotify, but it could be bad news for SoundCloud. The struggling company had used remixes as a differentiator from its larger, wealthier competitors and recently has been reported to be in discussions with Spotify regarding a buyout.
SoundCloud recently raised $100 million — a portion of which came from Twitter Inc. (NYSE: TWTR) — at a $700 million valuation, while Spotify’s valuation was given as around $8.2 billion in June of 2015. Sweden-based Spotify recently claimed 40 million paid subscribers, more than double the 17 million claimed by Apple Music.
Spotify did get a bit nervous when SoundCloud announced a $5.99 monthly subscription service, but then SoundCloud backtracked and offered the subscription for $9.99. SoundCloud’s 200 million users stayed away in droves. A July report in Billboard said that SoundCloud added subscribers numbering only in the “tens of thousands” in its first four months of offering a subscription service.
The best reason for Spotify to acquire SoundCloud is summed up by the company’s CEO, Daniel Ek. In a television interview cited by the Financial Times, Ek said:
The next decade for us is very much about ensuring that even more of these artists can live on their music, and bringing them together with a new audience. Today our users say ‘introduce me to new music’. What the artists say is ‘help me finding my audience’. Essentially, that’s two sides of the same coin.
Another good reason is to keep Apple from getting it. Or Amazon.com Inc. (NYSE: AMZN). Or Alphabet Inc. (NASDAQ: GOOGL). Or maybe even Pandora Media Inc. (NYSE: P).