“I’m working on the SoundCloud thing.” In July, Chance the Rapper tweeted his support for the struggling music streaming service. And thanks to a last-second investment round, SoundCloud lives to see another day.
Market Snapshot
- Major U.S. indexes finished higher despite geopolitical tension.
- Snap shares fell 14% a day after the company missed earnings.
- Gold hit a two-month high as investors continued their flight-to-quality.
- Tesla sold $1.8 billion in eight-year, high-yield bonds.
Rise Above the Clouds
Investors saved music streaming service SoundCloud from the brink of financial collapse on Friday, closing an emergency $170 million Series F that amounts to SoundCloud’s biggest funding round…ever.
In addition to the money, SoundCloud raided the C-suite of video platform Vimeo, bringing in CEO Kerry Trainor and COO Mike Weissman to right the ship.
So, is this emergency cash a hastily-applied Band-Aid or will SoundCloud, which cut 40% of its workforce last month, return to full health?
Big (Un)friendly Giants
SoundCloud will have to put this funding to good use if it wants to penetrate a streaming world in which Spotify (60 million subscribers and a rumored IPO) and quickly growing Apple Music have stolen the show. That means strengthening its paid subscription offerings like SoundCloud Go (for listeners) and SoundCloud Pro (for artists).
It’s clear that SoundCloud’s dominant model of free, ad-supported streaming is bad business. In 2015, revenue from vinyl—a 1951 invention—outpaced free services from Spotify, YouTube music, VEVO and SoundCloud combined.
Like a monthly utility, users are increasingly willing to pay for a subscription model ($9.99/month is the standard) for access to virtually every song in the history of music.
But not every song
And this is where SoundCloud thinks its can provide value to the industry. SoundCloud’s library is full of user uploads, making it one of the best places on the internet for music discovery.
Because SoundCloud isn’t just a platform for amateur musicians like your high school metal band, but also some very good ones. Chance the Rapper released his first two mixtapes on the site, and has been a Cloudhead through and through.
Moving forward, though, SoundCloud will need more than Chance’s cheerleading to survive…maybe something like a sound business plan.
You’ve Been Served
If proper table manners aren’t your strong suit, now’s not the time to take notes…at least from Benchmark Capital and Uber’s other top board members.
On Friday, the “Uber Shareholder Alliance” penned a letter to Benchmark—the VC firm responsible for former CEO Travis Kalanick’s departure—asking that it divest 75% of its holdings and remove itself from the board.
Of course, this wasn’t out of the blue. The note was written in response to Benchmark’s lawsuit last week, where it attacked Kalanick for controlling two empty board seats…among other abuses.
For its part, the Alliance believes Benchmark’s stunt is a step too far. These public attacks not only degraded an executive that helped turn Benchmark’s $27M investment into $8.4 billion, but it also distracts Uber from getting back on track.
Which probably starts in the HR department. Uber is still looking for a CEO, COO, CFO, CMO and president.
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Feeling Deflated
Break out the credit card—it’s time for a late-summer shopping spree.
That’s because the Labor Department reported consumer prices only rose 0.1% in the month of July, missing expectations of a 0.2% increase.
The Federal Reserve keeps an eye on inflation through the Consumer Price Index (CPI), which is a measure of how much goods and services cost, from your cell phone plan to that new convertible you were saving up for.
But, while consumers are loading up their shopping carts, economists are anxious for inflation to reach the 2% annual growth rate that the Fed is mandated to maintain (right now, it’s at 1.7%).
And those rate hikes we’ve all been hearing about? Based on this less-than-stellar report, they might not be coming as quick as expected.
No Spoiling the Fun
Amazon is going Zero Dark Turkey with its new food preservation technology.
It’s not classified intel that Amazon is after the $700 billion U.S. grocery industry—just look at its recent $13.7 billion acquisition of Whole Foods. But that doesn’t mean it doesn’t have a few military secrets up its sleeve as well.
Amazon is turning to an age-old food preservation technology used by the U.S. military to combat the many logistical issues confronting food distribution. It’s called the “microwave assisted thermal sterilization” process, a long-winded name for simple solutions: food will be securely packaged and sterilized, flavor will be better preserved, shelf life increased by over a year and the need for refrigeration will be eliminated.
It’s a good day to be a nonperishable.
What Else Is Happening…
- Lawyers seek an additional $1 billion from GM in an ongoing legal battle over faulty ignition switches.
- The Trump administration will launch a probe into potential IP theft by the Chinese government.
- Daniel Loeb’s hedge fund Third Point bought 4.5 million shares of Alibaba worth $634.1 million.
- A special Amtrak route to view the solar eclipse in Illinois sold out in less than a day.
Economic Calendar
- Friday (August 11):
- Earnings: JC Penny (-)
- Economic Calendar: CPI (-), Baker-Hughes Rig Count (+)
- Monday:
- Earnings: T-Mobile
- Economic Events: Labor Market Conditions, Consumer Credit
- Tuesday:
- Earnings: Coach, Home Depot, Urban Outfitters
- Economic Events: Retail Sales, Import and Export Prices, Housing Market Index
- Wednesday:
- Earnings: Cisco, Perry Ellis, Progressive
- Economic Events: MBA Mortgage Applications, FOMC Minutes
- Thursday:
- Earnings: Alibaba, Gap, Wal-Mart
- Economic Calendar: Jobless Claims, Industrial Production, E-commerce Retail Sales, Money Supply
- Friday:
- Earnings: Deere & Co, Estee Lauder, Foot Locker
- Economic Calendar: Consumer Sentiment, Baker-Hughes Rig Count
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Water Cooler
From The Crew
From Michael: Conscience of a Cyborg
While the rest of the world is peeking through the cracks of their fingers to see what happens with the U.S. and North Korea (and rightfully so), Elon Musk is still tweeting, “If you’re not concerned about AI safety, you should be. Vastly more risk than North Korea.” The very tweet sent me down a rabbit hole of learning a little more about the implications of artificial intelligence.
Here’s an article that shed some light
From Neal: Get Smart with Tyler
Tyler Cowen is an economist’s economist. If you’ve ever thought about your steak dinner’s marginal utility or the opportunity cost of watching baseball, this is the guy for you. But the thing about Cowen—he’s an expert on nearly everything (I’m not even exaggerating about this…just hear him talk about regional Chinese cuisine). He’s also pretty funny. Which is why I never miss his podcast, simply titled “Conversations with Tyler.” My favorite has to be his chat with Stripe CEO Patrick Collison.
From Alex: Flying Under the Radar
I am fascinated by the ability of individuals to create loyal communities and passionate followings. Which is why I was blown away to learn about Kylie Jenner’s new cosmetics company, Kylie Cosmetics. You may be saying to yourself, “Passionate movement…seriously?” Yes, seriously. The company has done $420 million in sales in 18 months and could be a $1 billion brand by 2022. It took cosmetics powerhouse Bobbi Brown 25 years to reach the $1 billion mark.
From Lauren: Ikea + Apple
If you’ve ever moved into a new place, you’re familiar with the stress of envisioning just how well that new piece of furniture is going to work in your 12×10 bedroom. Luckily, Ikea is partnering with Apple to create an AR-based application that will let consumers try out virtual furniture at home before setting out and buying them. The application is set to launch this fall and Ikea believes it’s set to “become the biggest AR-platform in the world overnight.”
Question of the Day
Coach Miller is filling out the starting lineup for her indoor soccer team. There are 10 girls on the team, and she must assign 6 starters to the following positions: 1 goalkeeper, 2 on defense, 2 in midfield, and 1 forward. Only 2 of the girls can play goalkeeper, and they cannot play any other positions. The other girls can each play any of the other positions. How many different groupings are possible?
A. 60
B. 210
C. 2580
D. 3360
E. 151200
(Give Up?)
Who Am I?
- I am the richest woman and the 14th richest person in the world.
- I inherited 33% of the largest cosmetics company on earth.
- This company recently sold The Body Shop, which it bought back in 2006 for $1.1 billion.
- In 1987, I started a foundation to support and develop medical, cultural and humanitarian projects.
Stat of the Day
$1 trillion
The damage inflicted on global stocks this week as a result of escalating rhetoric between the U.S. and North Korea. A flight-to-safety has driven investors to havens such as the yen, the Swiss franc, gold and government bonds.