ELIAH SETON:
THE HITS INTERVIEW

SoundCloud CEO Eliah Seton is very much in the process of transforming the highly influential DSP, which was a key factor in music discovery during the dawning days of the streaming revolution, for the present ecosystem. Now, the exec—who served a significant tenure on the label side as a Warner Music Group exec—and his team are also laser-focused on amplifying the role of fans.

A number of artists who first blew up on SoundCloud went on to big success at major labels, including Post Malone, Billie Eilish, Shaboozey, Lainey Wilson and Zach Bryan. Now Seton and company are hoping for a similarly big arc for a slew of new acts, such as teen R&B/hip-hop phenom Laila!, whose early SoundCloud action has translated to big activity at TikTok and inroads at Spotify.

What’s top of mind for you at this point in your tenure?

I’m 15-ish months in as CEO, and SoundCloud is the healthiest it’s ever been. We needed to put ourselves in the driver’s seat of where this company was going and really put SoundCloud’s destiny in our own hands. It’s a 17-year-old startup that has lived many lives, and everybody’s got their preconceived notions. Those first six, nine months were about getting the business as healthy as possible, and that meant getting profitable. We got there for the full year of 2023. Being able to step back and take a clean sheet of paper to how this business is structured, how we’re organized, how we work and really integrate music and tech was a major opportunity to get us healthy, and we’re a profitable growth company for the first time.

What was key to getting you there?

The most important was putting ourselves in a position where the operating metrics could really flourish. We are breaking records at every metric—record fan subscribers, record ad sales, record creators, subscribers, record usage, record engagement metrics and obviously record revenues and record profits. That is really an output of this integrated music-and-tech approach that has changed the way we operate.

The healthy outlook extends beyond just the P&L and the operating metrics to the product. Our usage for a long time was retained because of brand loyalty—folks who were passionate SoundCloud users, who kept coming back to the platform and the app. But for a long time, that app and that platform were not as active and were somewhat dormant. The last two years, that’s totally changed and our product leadership, led by Rohit Agarwal, our chief product officer, has been totally turned around. We now have a world-class product team that is shipping product at a world-class clip and that is delighting fans and creators.

We think of the business in two different commercial segments: our fan business and our creator business. Our fan business looks like a DSP would look. It has ad-supported and paid subscribers. That’s what drives the revenues—hundreds of millions of fans coming to the platform to discover what’s next in music, to find the remix they heard in the club, to find the next great hip-hop artist, to be the first follower of the next Billie Eilish or Post Malone. That fan business has as much of the world’s music as any platform you’ll find on the planet.

We’ve got 400 million tracks on the platform. A traditional DSP has about 100 million tracks. We’ve got all those through our content licenses and we’ve got another 300 million user-generated content tracks by unsigned artists. Those are creators who are looking to be discovered and find their fans. It’s this massive universe. Those creators are paying a subscription for access to products, tools and services to begin and advance their careers. That’s our flywheel—our virtuous circle of fans and creators coming to the platform to find one another and engage with one another in a unique way. That virtuous circle forms the foundation for everything we’re trying to do in the business.

Let me ask you about these creator tools—what are they and how do they benefit creators more than what’s available elsewhere?

The place I would start is to articulate SoundCloud’s point of differentiation, as we are the only place exclusive to music that connects artists and fans directly. So you’ve got those hundreds of millions of fans coming to find what’s next in music. You’ve got those millions of creators coming to find those fans. When I was at Warner Music Group and working for Steve Cooper, the then-CEO, he had been the CEO of companies across probably a dozen different industries, and his great frustration in music and at the major-label side was that they would spend a billion dollars in A&R and marketing and promotion and have no access directly to the end user, the fan. It seemed completely crazy to spend so much of your cost structure against delighting a fan or a customer that you couldn’t access.

At the same time, traditional DSPs like Spotify knew that in order to make their business models work, they needed to start working directly with artists, because the cost structure of content licenses was so penal and so challenging. They sought a path to work directly with artists, but the labels wouldn’t have it and didn’t permit that sort of direct engagement. For us, [engagement] in our DNA.

As the only creator platform in music that has direct access to audiences, a big part of that value proposition for creators is to get them heard. Internally, we call this “Get heard, get fans, get paid.” There are 46 million tracks on streaming platforms that don’t get any listens, and some of those may be bots or noise or rain on a tin roof, but most of them are real live artists who are unable to find fans, engage with fans and earn income from streaming. By virtue of the fact that we can access fans directly, we can get those artists heard. We’re solving what is known as the “zero plays problem,” and we do that through our creator product.

We use our AI and machine learning-based tools to put those artists and tracks in front of fans who might like it. It might have a similar beats-per-minute or similar genre, or the fan may be listening to artists who might follow that other artist, and that’s what we call First Fans. We get an artist their first hundred fans. From that pool, we look at the results and for the high performers, the folks who are getting repeat listens and fewer skips and save to library, comments on tracks and lots of engagement, we will graduate those artists to what we call P1000. That’s your first thousand fans. It’s a broader cohort.

So the expanded funnel for this tier involves expanded criteria for possible affinity.

Yeah, exactly. Three years ago we bought an AI music-tech company called Musiio, based in Singapore and London. We integrated Musiio into SoundCloud and it brought with it these fantastic, incisive AI and machine-learning-based tools and capabilities that allow us to understand the real DNA of a song and do so utilizing AI engineering talent.

When those tracks do well with those first hundred fans, we graduate them to the next 1,000. For the cohort that do well in their first thousand fans, we’ll start to playlist those artists and tracks on what we call Buzzing playlists across hip-hop, R&B, EDM and pop. These are artists and tracks who just a few weeks ago had never gotten their first listens but are proving, based on the consumption patterns, that there’s something real. We’re starting to see some of those acts get picked up and discovered by the A&Rs who scour the platform. So that, I think, is a good example of how we’re using our point of differentiation: We connect artists and fans together directly on our platform to give a value to creators that they can’t find anywhere else.

I also wanted to talk to you about SoundCloud’s role not only in breaking acts that have been bubbling under but also assisting established acts.

SoundCloud has a rich history of breaking artists and of being a day one for big artists who continue to come back to the platform to find those super fans and re-engage them. That’s been true with remixes and in the DJ community and EDM. It’s obviously been true with SoundCloud rap—there’s a whole subgenre named after the platform.

That’s right.

And being a day-one for the likes of Post Malone or Lil Nas X or Billie Eilish. What I would think of as maybe the crown jewel of the platform is what we call our Creator Network map. Imagine a map of the world—except it’s not, as there’s no relation to geographic proximity. What look like continents are clusters of creators on the platform, made up of individual bubbles. Each bubble is an individual creator on the platform. The size of the bubble corresponds to listenership. Billie Eilish will be a massive bubble on the platform; my niece, with her first hundred listens, will be a tiny dot. Their proximity to one another is how similar the music is and how engaged with one another those artists and those fans are. When you have these clusters of bubbles, you’re seeing subgenres.

Ten years ago, had we had the Creator Network map, we would have come into the office one day and seen this pulsing heat map in the corner, and that would have been SoundCloud rap. We would have seen each of those big artists popping off by the hour. Now, we see these clusters developing, and they’re from all over the world.

Presumably country and Americana too, right?

Absolutely. For artists who are already homegrown talent, we tried to retain that kind of day-one status and allow the platform to serve artists who want to come back and find their day-one fans. That happens organically all the time. Lil Nas X dropped three consecutive exclusives this spring as part of a marketing and promotion effort—on his own, without his label and without his management. But Lil Nas X knows that his most engaged fans can be found on SoundCloud. Lil Yachty did the same. So did The Kid LAROI. We’ve seen exclusives from a lot of artists who are signed to traditional deals and yet are coming to our platform to engage with their fans in a unique and differentiated way.

SZA did this with her last album. She took two tracks that were not part of the album and dropped them from her original user profile under a different name. Her most fervent fans found this right away and it contributed amazingly to the marketing and promotion campaign. This all comes back around to a really exciting campaign we were able to contribute to this spring and summer with Billie. We had a great opportunity to partner very closely with her whole team and with Darkroom and Interscope, and they were willing to push the envelope with us.

We did a couple things that were pretty unprecedented. She credited SoundCloud with her start from the stage when she won her first Grammy. We were able to identify her first fans on the platform dating all the way back to the beginning, and to create a dedicated page celebrating those fans and giving them an exclusive look at the music with Billie’s blessing and permission—and a message from her. To be able to do that for every artist on the platform, ultimately, is one of our goals. I love the idea that every person who comes to listen to music on SoundCloud may have been one of the first fans of the next Billie Eilish. To be able to have a badge or some sort of status on the platform that identifies that fandom is really exciting to us.

Since you worked at a major label and understand how one operates, give me your sense of how the majors fit into the present ecosystem.

That’s a great question and one that is close to my heart and mind because, as you pointed out, I did spend a good chunk of time in the major-label system. What’s clear is that the history of commercial music has lived with content owners, rightsholders and the major labels. The future of music, we believe, will live with global, scaled platforms that connect artists and fans directly. That is our founding DNA and ultimately underpins a lot of why I ended up taking the leap to come to SoundCloud. Because if you were starting a new company in music and tech today, the first two things you’d want to have are direct access to artists and fans at scale and the ability to connect artists and fans without anything in between on the platform. That’s what SoundCloud has been doing for 17 years, and I think now the industry is finally ripe for that. What it comes down to is a premise that both incumbent labels and traditional streaming platforms find somewhat challenging: that streaming is not enough.

Can you elaborate?

We know that streaming is not enough for the vast majority of artists who aren’t household names. There are so many other things you need to do to make enough income to pay the rent and feed your family as an artist. Streaming is also not enough for fans. There are some fans who are more passive listeners and for whom putting on a Top Hits playlist in the background might be sufficient, but certainly for the fans we care about on our platform, streaming is insufficient. If you are a rabid Lil Yachty fan and you are streaming a track or an album 24-7, you’re paying the same subscription dollars that somebody who forgot that they’re even subscribed to that service is paying.

Streaming is not enough for the fans who are looking to actually spend money, and, from their business model, I think we know streaming is not enough for streamers. For us, that’s an underlying premise, because we’re the one platform exclusive to music that actually connects artists and fans to be able to monetize the engagement between them. And rather than dividing the streaming pie into thinner and thinner slices in what inevitably is a zero-sum game with decelerating growth, we’re talking about putting new pies on the table—new sources of income that will allow more artists to get paid more from different forms of monetization beyond streaming, and for fans to express their fandom on the platform and create new formats for monetization beyond what exists today. I think we’re uniquely positioned to do that in a way that incumbent labels and streaming platforms are not.

How does the monetization part manifest in terms of the actual user experience?

As a baseline, having artists and fans engage in ways beyond streaming allows us to start running experiments. A fan might come to the platform to stream a track, but they’ll stay on the platform to engage in some other way. They’ll comment on the track, they’ll repost it, they’ll share it, they’ll DM with another fan, they’ll DM with an artist, or they’ll react to comments.

Starting to experiment with these forms of engagements is a big part of our current roadmap, so we’ve done that, for example, with private links. We have 100 million tracks on the platform that are not yet published. The creators have decided to hold them private for the moment. The notion of a private link is endemic to SoundCloud. Giving an artist the ability to monetize that as a form of exclusive content is a major opportunity for us.

As far as integrating merchandise, we’ve run a few experiments where we’ve bundled a track with a T-shirt. We’ve sold exclusive vinyl to artists on an experimental basis. Ultimately, what these experiments are showing us is that the latent willingness to pay is there. Fans want to express their fandom monetarily, and artists are jumping at the opportunity to find ways to make income on the platform.

This is not new in music, but it’s new to Western markets. If you look at Tencent Music, Cloud Music, owned by NetEase and Weverse, owned by HYBE, on these platforms in greater China and Korea, we’re seeing these forms of non-streaming income really take off. The streaming ARPU (the average revenue per user) on streaming for Tencent Music is about $1 U.S. equivalent. The non-streaming ARPU for all these other forms of monetization that fans are spending money on the platform is $25. So it’s 25 times. I mean, can you imagine if Spotify’s ARPU were increased by 25 times? It would be an unbelievable, seismic…

…revolution.

Yeah, totally. We know that not all of these consumption patterns and behaviors will translate to all different markets, but some of them will, and we know that there’s a willingness to pay by super fans. It’s one of the key components for what’s next at SoundCloud.

Speaking of humans, let’s talk about you. I really wanted to talk to you about your early life, and notably how music first became prominent in the picture for you.

Be careful what you wish for, because I will share. My grandmother was an opera singer and one of the first women to matriculate at Curtis Institute, the famous conservatory. She became a vocal coach on Broadway who would teach Hollywood actors and actresses for stage voice. She taught Katherine Hepburn and Audrey Hepburn and Johnny Carson and Barbra Streisand out of my grandparents’ apartment in Hell’s Kitchen, where they raised my father.

I sang in lots of different groups growing up, one of which was, I’m embarrassed to admit, an a cappella singing group in college. It really transformed my life for two reasons. One, I met my husband in that group. We sang in it together, and 20 years later here we are married, with two children and a dog. In that group, I served as its general manager as well as performing in it. We recorded two albums that year and toured the globe. I had never been out of the country, and I went to over 50 countries singing with that group. It was like managing a business, and I had recognized by this point that I was unlikely to succeed as an artist and a performer in my life. But it taught me at the age of 21 that I wanted to run a creative enterprise. I needed to go get a business education, so I did.

When I got out of my MBA program in 2009, what better place to go to when the world was totally upside down during the global financial crisis than an industry that was even more upside down than that? I got my first gig in music that fall of 2009, and I suppose the rest is history.