Brief:
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Spotify, the music streaming service with 60 million paid subscribers, acquired online music studio startup Soundtrap to provide recording software for musicians, according to a blog post. Soundtrap makes freemium music and podcast production software that has a collection of loops and can be connected to musical instruments. Terms of the deal weren't disclosed, TechCrunch reported.
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Soundtrap has 35 employees and last year lost $2.6 million on revenue of $118,000, Dagens Industri reported. The Swedish publication said that Soundtrap a year ago was valued at $24 million.
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Soundtrap's entire team will be joining Spotify, including founders Björn Melinder, Fredrik Posse, Gabriel Sjöberg and Per Emanuelsson. Its software — which works on iOS, Android, Chromebook, Linux, Mac and Windows platforms — lets people record music tracks and save their projects to the cloud to share with others or to collaborate in real time.
Insight:
Spotify, which is said to be valued at $16 billion ahead of a possible IPO next year, has been steadily snapping up companies in order to build out its content and improve its technology. Spotify's acquisition of Soundtrap is geared more toward music creators and follows its purchase in April of Mediachain Labs, a blockchain technology to match royalties with rightsholders.
By acquiring Soundtrap, Spotify is entering a crowded field for music production software that includes Avid Pro Tools, Apple Logic Pro, Sony Acid, Ableton Live, Steinberg Cubase and Cakewalk Sonar. It's not clear how Spotify will help to distinguish Soundtrap, although being a cloud-based software platform does give the technology a chance for broad distribution to anyone with a web browser.
In fostering more talent directly on its platform, Spotify might be enacting a strategy that mirrors that of Google's YouTube, where it works to establish a homegrown network of creators that could double as influencers and brand partners in the future. Spotify has worked hard to innovate its advertising, including through more video options and sponsoring of curated playlists, and the Soundtrap buy could aid in those efforts.
In addition to paying royalties to big-name recording artists, Spotify also lets comparably unknown artists a chance to distribute and promote their music on its platform. However, the company has also has been accused of not properly sharing royalties with artists, and last year reached a $30 million settlement with the National Music Publishers' Association following a class action suit over unpaid royalties, Billboard reported.
As Spotify prepares for a possible IPO, it needs to demonstrate a path to profitability after losing between 100 million and 200 million euros during the first half of the year, The Information reported.