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.
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.
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.