SoundCloud to cut staff numbers by 40%

Company says move will enable it to compete with Spotify and Apple

SoundCloud’s inability to create a stable business model on top of its large audience is indicative of broader challenges in the music industry.

SoundCloud’s inability to create a stable business model on top of its large audience is indicative of broader challenges in the music industry.

 

SoundCloud is cutting about 40 per cent of its staff in a cost-cutting move the digital music service says will give it a better financial footing to compete against larger rivals Spotify and Apple.

SoundCloud, which in January said it was at risk of running out of money, informed staff on Thursday that 173 jobs would be cut. It had 420 employees. The company’s operations will be consolidated to its headquarters in Berlin and another office in New York. Offices in San Francisco and London will be shut.

“We need to ensure our path to long-term, independent success,” Alex Ljung, the company’s co-founder and chief executive officer, said in a blog post to be published on SoundCloud’s website. He said the company had doubled its revenue over the past 12 months – without providing specifics – and that the cuts put it on a path to profitability.

Expansive library

SoundCloud has roughly 175 million listeners who are drawn to its expansive library of songs, dance mixes, podcasts and other user-generated content uploaded by artists ranging from established stars to bedroom DJs. Popular among passionate young music fans, artists such as Chance the Rapper post material to the site before it’s released elsewhere, while record labels use it to scout new talent.

But the cultural cachet has never translated into a successful business model. Most of the content on SoundCloud is free, and a subscription tier introduced last year that put some content behind a paywall hasn’t been as successful as executives hoped. In recent years, the company has explored a sale to Twitter and to Spotify, but a deal never reached the finish line.

Mr Ljung said the goal of the cuts was to remain a standalone business. “By reducing our costs and continuing our revenue growth, we’re on our path to profitability and in control of SoundCloud’s independent future,” he said.

SoundCloud’s inability to create a stable business model on top of its large audience is indicative of broader challenges in the music industry. While consumer adoption of streaming services has led the world’s largest record labels to see sustained sales growth for the first time since the glory days of the CD, the companies delivering the music online have struggled to make money. Pandora Media has never had an annual profit and Spotify remains unprofitable. Meanwhile, companies such as Apple and Amazon. com use music to draw users for their broader businesses. – Bloomberg