SoundCloud Bankruptcy Nears: 173 People Laid Off; 2 Offices Closed

SoundCloud Offices, Manhattan

SoundCloud’s lavish Manhattan offices. Overspending has been a serious concern at the company.

The situation at SoundCloud is quickly deteriorating, with bankruptcy potentially next.  Company CEO Alex Ljung has just announced the layoff of 173 employees.  Offices in San Francisco and London will be shutting down immediately.

Amidst a bevy of possible buyouts, SoundCloud’s financial system is heading towards implosion.  The company has just announced that 173 staffers are being let go, with two major offices going dark.

According to official word from company CEO Alexander Ljung, offices in San Francisco and London are getting shut down.  Effective immediately, all operations will be shifting to Berlin and New York.

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The company boasts 175 million users across 190 countries.  But despite the massive userbase, SoundCloud has struggled to create a profitable business model.  And for more than a year, industry onlookers have been fearing a total financial meltdown.

Part of the problem seems to be wild overspending.  The company has routinely splashed for expensive perks, including lavish offices worldwide.  Those treated to meetings in New York, San Francisco, London, or Berlin have witnessed what good office living looks like.  But of course, all of those trimmings carry a price tag.

These Lavish Office Photos Are Coming Back to Haunt SoundCloud

Aside from those outward signs of opulence, delivery of ad-supported streams with minimal premium accounts dragged the bottom line.  SoundCloud itself remains a monstrous site, but delivering all that multimedia introduces steep bandwidth costs.  Last year, losses ballooned past $50 million, despite growing revenues.

Earlier this year, SoundCloud’s CEO alluded to possible bankruptcy ahead, with mounting debt and impatient investors causing concern.  Separately, deals with major labels like Universal Music Group seemed to help, though licensing came with significant costs and downstream promises.  At present, it’s difficult to tell if SoundCloud has met its obligations to its major label partners, financially or otherwise.

Worsening financial problems may have caused Spotify to pass on an acquisition opportunity.  Presently, on-demand streaming rival Deezer is also whispered to be taking a look, though nothing has been announced.  Others may have also kicked the tires, though massive debt and licensing obligations could be intimidating to would-be buyers.

According to SoundCloud CEO Alex Ljung, the layoffs are effective immediately.  Here’s his official email to staff.

Eric and I founded SoundCloud nearly 10 years ago as we saw a need for something that would enable artists to share and connect through music. As we hovered together back in 2008 to push the button that would make SoundCloud live for the entire world, we had no idea the impact our, then tiny, platform would have on the future of music culture, and millions of listeners and artists around the globe.

In the competitive world of music streaming, we’ve spent the last several years growing our business, and more than doubled our revenue in the last 12 months alone. However, we need to ensure our path to long-term, independent success. And in order to do this, it requires cost cutting, continued growth of our existing advertising and subscription revenue streams, and a relentless focus on our unique competitive advantage — artists and creators.

“By reducing our costs and continuing our revenue growth, we’re on our path to profitability and in control of SoundCloud’s independent future.”

With more focus and a need to think about the long term, comes tough decisions. Today, after careful and painful consideration, we took the difficult step to let go of 173 SoundCloud staffers and consolidated the team into two offices: Berlin and New York. We are extremely grateful for the contributions of each and every staff member who will be leaving SoundCloud, and we wish all of them the best. Without them, we would not be where we are today.

By reducing our costs and continuing our revenue growth, we’re on our path to profitability and in control of SoundCloud’s independent future.

So what does this mean for SoundCloud? The SoundCloud platform listeners and artists love will remain available in more than 190 countries globally. SoundCloud will continue to be the place for what’s new, now and next in music, powered by the world’s most diverse music community. I look forward to sharing more about our future plans in the weeks and months ahead.

Alex

10 Responses

  1. The Tired Horizon

    Pretty peeved that Soundcloud ignored everything its userbase has been telling them for the past 2 years. They could have avoided this imvho. They charged for services that were free elsewhere. They failed to tackle the spam. They could have made a fortune by allowing users to sell albums and mp3s through the site (like Bandcamp) and dropping the Pro membership pricing would have brought in a lot more paying members.

    Reply
    • M. Summers

      Sadly, mismanagement is the norm rather than the exception in business. To really understand what’s going on, check out a piece titled The Hatchet Man’s Playbook. Can’t recommend it highly enough.

      Reply
    • sam

      they have been ignoring the content creators that made the platform what it was for way longer than 2 years. If they would have taking a note from youtube and empowered their creators and gave them tools, they would not be here. Instead they continued to strip away creation tools to focus on getting more users to stream (including recording from the mobile app).

      If youtube didn’t put in the effort they did to make posting great looking videos as easy as possible, they would have never been as successful as they are now. Soundcloud could have been that parallel force for music, but failed.

      The entire indie music creation scene is so fragmented now between bandcamp, youtube, soundcloud and others, it’s never going to consolidate under a single distribution platform for some time

      Reply
    • M. Summers

      Sadly, mismanagement is the norm rather than the exception in business. To really understand what’s going on, check out a piece titled The Hatchet Man’s Playbook. Can’t recommend it highly enough.

      Reply
  2. MS

    it’s sad news, no need to pile on. soundcloud provides a great service.
    obviously it’s annoying to hear that tech companies may have overspent to the demise of their own business, but this article is being pretty damn presumptive to imply that it directly caused their downfall. the author has no idea if that’s the case, unless he somehow got ahold of their balance sheets.

    clearly there are imperfections to the service, as with any. SC Go is too expensive, moving a bunch of downloads to premium-only sucked for longtime users, a really limited mobile app, etc. but as a many-year user, i’m more in the mood to wish them well, rather than beat them up for it…

    Reply
    • sam

      “this article is being pretty damn presumptive to imply that it directly caused their downfall”

      Do you even use Soundcloud? The core user base has been trying to communicate with Soundcloud’s development and management for almost half a decade now, only to be completely ignored. Soundcloud has yet to implement a single business move based on core-user feedback, they usually go completely against it, without explanation.

      Soundcloud has been given warnings for years, they ignored them and are now in the exact situation everyone told them they would be in. No one is being presumptuous, Soundcloud was being arrogant.

      Reply
  3. The Cat Crept In

    Of course the beauty of having an Internet tech start-up/yet-to-be-I.P.O-Listed
    corporation is that you start seeing large sums of money floating about and it’s so easy to just go and charge everything to the company card..

    Fancy offices, luxury suites, International travel, in-house well appointed kitchens and chefs.. sumptuous break-out areas and entertainment precincts within the
    office compound..

    What’s the point of having a cashed-up corporation if you can’t enjoy some of the spoils.. Of course when the cash runs out everyone will be running to the hills…

    Reply
  4. K405

    Fk them. Artists MADE soundcloud what it is, and they slapped all of us in the face with their prices. Nice offices guys.. those will look great when no one wants to Pay for services you can get for Free. Burn SC Burn x)

    Reply

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