Twitter Backs Out of Deal to Buy SoundCloud

Twitter has backed away from acquiring the music-hosting site SoundCloud. Here's why.

Twitter has reportedly backed out of discussions to acquire SoundCloud, a music-streaming website described as the "YouTube of music."

Rumors of the deal started making the rounds May 20, but quickly dissipated when a source close to the social media giant told a Wall Street Journal reporter that "the numbers didn't add up."

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SoundCloud

Twitter has reportedly backed out of discussions to acquire SoundCloud, a music-streaming website described as the "YouTube of music."

Rumors of the deal started making the rounds May 20, but quickly dissipated when a source close to the social media giant told a Wall Street Journal reporter that "the numbers didn't add up."

One of the biggest reasons the company bowed out of the SoundCloud deal, according to several published reports, is SoundCloud's lack of a licensing agreement with music publishers, which SoundCloud needs in order for its subscribers to legally stream copyrighted music. Like YouTube, some of the material that users post to SoundCloud is illegally shared copyrighted music. However, most content on the site is from little-known DJs and musicians who want to create buzz for their own mixes and songs.

Twitter hasn't had much luck in its attempts to get into the music business. In 2013, the company launched its own app, with music-streaming partners iTunes, Rdio and Spotify. The app was supposed to help Twitter users find and share new music based on accounts they follow, but it never caught on and eventually got scrapped. Twitter is also trying to partner with Beats Music to help the music-streaming service acquire new subscribers, but now Beats Music's parent company, Beats Electronics, is in talks to be acquired by Apple for $3.2 billion.

Twitter raised $2 billion from the initial public offering of its stock, and many observers said purchasing SoundCloud would not have been a wise investment. They point to Twitter's $350 million acquisition of MoPub, a mobile-advertising firm, as a better extension of its current business model.

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