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Did Time Warner Inc (TWX) Sign A Deal With the Devil Or a Messiah?

Time Warner Inc (NYSE:TWX) has signed a deal with the popular music streaming platform, SoundCloud, but as the exact terms of the deal are unclear, the New York based media and entertainment company’s gains remain abstract. SoundCloud CTO and Founder, Eric Wahlforss, spoke on Bloomberg about some of the details regarding the deal with Time Warner Inc (NYSE:TWX).

Time Warner Inc (NYSE:TWX)

” […] We have signed a licensing agreement with Warner Music Group and Warner Chapell Music Publishing, which means that all Warner artists on Warner Music and all the songwriters on Warner Chapell are benefitting from this deal and this means that they are able to join our On SoundCloud Program, which is essentially our revenue sharing program, so we are looking forward to become a very significant revenue generator for Warner in the near future […],” said Wahlforss.

SoundCloud does have a potential to be a significant contributor to Time Warner Inc (NYSE:TWX)’s top line, but the company might not be there yet. According to an article on Techcrunch, the German based music streaming service was more or less hemorrhaging money in 2013. According to the article SoundCloud lost $29 million in revenues for the year in focus. That number seems even more substantial when compared to the company’s revenues of just $14 million.

Time Warner Inc (NYSE:TWX) does have one advantage for playing the role of sugar daddy for SoundCloud. It is the 175 millon unique listeners every month that SoundCloud has in its arsenal, which might lack in profitability as of now, but the future might have great things in store for it. For many these music platforms are the next best thing to attending top events around the world, including music festivals.

Active users is the key feature for any social media platform and Time Warner Inc (NYSE:TWX) knows it well. A number of revenue making tools especially in the advertisement space can be constructed around it. The On SoundCloud program which Wahlforss mentioned is a step in that direction.

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