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SoundCloud expands streaming service to step up challenge to Spotify, Apple

SoundCloud has expanded its subscription music streaming service to the U.K. and Ireland, and introduced new advertising features to monetize the platform as it looks to step up its challenge to the likes of Apple and Spotify.

Eight-year-old SoundCloud allows people to upload tracks. It's best-known as a place to find emerging artists, DJ sessions and remixes of songs.

The German company launched SoundCloud Go in the U.S. earlier this year, offering users access to ad-free music streaming and new songs accessible only to paying users.

SoundCloud has now brought the service to the U.K. and Ireland for £9.99 ($14.64) or 9.99 euros ($11.47) a month, putting it on par with Spotify and Apple Music in terms of price.

Earlier this year, SoundCloud signed a licensing deal with Universal Music Group and Sony Music Entertainment, adding to an existing partnership with Warner Music Group, in order to bring more music to the platform.

SoundCloud

The company claims to have more than 125 million tracks on its service. But around 110 million of those are user-created tracks on the free part of its service. That would give it about 15 million songs that are on SoundCloud Go, less than the 30 million-plus boasted by Apple Music and Spotify.

Many of the early reviews of SoundCloud Go complained that the service lacked full catalogues of music from artists and many of the big stars were missing, something the start-up has said will improve with time.

But SoundCloud's advantage comes from the fact that it has unique content from smaller artists and can help users discover those.

"The standard catalog of premium content is pretty much the same across all services…all of that is available on SoundCloud as well in addition to all this user generated content that doesn't exist anywhere else," Alexander Ljung, founder and chief executive of SoundCloud.

'Revenue potential'

The company will be hoping the expansion of SoundCloud Go can help the company overcome its mounting losses. In its latest public financial filing, SoundCloud made losses of 39.14 million euros in 2014, up from the 23.11 million in 2013. But revenues did rise.

SoundCloud also announced that it's free service will be supported by a number of different advertising features, including audio ads, in-stream native ads, promoted profiles, creator partnerships "and more", according to a press release.

"The introduction of advertising will ensure listeners can continue to experience SoundCloud for free, as well as offer creators the opportunity to be paid for the work that they share. SoundCloud Go subscribers will be able to opt out of these ads, enjoying uninterrupted listening as part of the service," the company said.

Ljung said that SoundCloud is following the model of many other technology start-ups by scaling up and monetizing its users.

"The internet has brought us a chance to build services that touch billions of people and getting to that kind of user scale and user growth is a phenomenal opportunity from that amount of users, there's obviously many great revenue potential," Ljung told CNBC.

Artist pay in focus

One of the biggest controversies around music streaming services has been the amount they pay artists.

Music streaming revenues in the U.S. grew 29 percent year-on-year in 2015 hitting $2.4 billion, according to the Recording Industry Association of America (RIAA).

Streaming revenues made up 34 percent of total U.S. music industry sales in 2015, up from 27 percent in 2014, with paid subscription services like Spotify and Apple Music becoming the fastest-growing portion of the market.

But another part of RIAA's report shows that the number of streams on ad-supported services, such as YouTube, rose 63 percent in 2014 while revenues rose 34 percent. This gap widening in 2015 with the number of streams doublingbut revenues only increasing 31 percent.

Ljung could not disclose how much SoundCloud is paying to artists compared to rival services, but said that its scale and new advertising features will make it an attractive platform for musicians.

"With the one piece of SoundCloud go it is the start of revenue generating feature…we are introducing advertising and we are introducing subscription. So with that we are opening up a new revenue stream to this massive audience that we have that then goes back to creators," Ljung told CNBC.