One more reminder that digital music remains a very, very difficult place to make money: Twitter has written off a $70 million investment it made in SoundCloud, the music streaming service.
Twitter put the money into SoundCloud in 2016, via its Twitter Ventures unit, in a deal that valued the company at $700 million. Now Twitter, via its 2017 annual report, says it has written off $66.4 million it invested in SoundCloud because that money is “not expected to be recoverable within a reasonable period of time.”
Variety first reported the news. For context: Twitter generated revenue of $2.4 billion in 2017 and ended the year with $4.4 billion in cash and short-term investments.
Twitter’s SoundCloud writedown isn’t a surprise, since almost all of SoundCloud’s existing investors were crammed down in a last-ditch funding deal last summer, which also brought in a new management team.
But it should be a formal coda to Twitter’s on-off infatuation with SoundCloud. Two years before the investment, Twitter had looked at buying SoundCloud for more than $1 billion, but didn’t.
And it’s a reminder that even though consumers have embraced free and paid music streaming services, the companies that run those services generally aren’t making a profit.
For giant tech guys like Apple and Google that run streaming music as a side business, that’s probably okay. For standalone companies like Pandora and Spotify, that’s not (reminder: Spotify is planning on going public in the next couple months).
Meanwhile SoundCloud, which had been pushing a $10-a-month subscription service like the one Apple and Spotify offer, is changing its strategy.
The new plan, as outlined by CEO Kerry Trainor at our Code Media conference this month: Focus on a more limited $5-a-month plan, as well as a renewed emphasis on a subscription service SoundCloud has always sold to music creators, producers and other prosumers.
Here’s my Code Media chat with Trainor:
This article originally appeared on Recode.net.