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Twitter’s $70 million SoundCloud investment is officially wiped out

Jack Dorsey invested in the music streaming service in 2016; last year he wrote off the deal.

Twitter CEO Jack Dorsey
Twitter CEO Jack Dorsey
Teresa Kroeger/Getty Images for Thurgood Marshall College Fund
Peter Kafka covers media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.

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:

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