SoundCloud, the music-streaming platform that has struggled in its recent efforts to transition from a free service beloved by musicians to a more formal subscription business, is cutting 40% of its staff in an effort to stay afloat, cofounder Alexander Ljung announced in a blog post Thursday (July 6).
The company, which warned of impending financial trouble in January, told staff on Thursday that 173 jobs will be cut and its offices in San Francisco and London will be closed. The news was first reported by Bloomberg.
“We need to ensure our path to long-term, independent success,” Alex Ljung, the company’s co-founder and chief executive officer, said in the blog post. He added that the company has doubled its revenue over the past 12 months and the belt-tightening is an effort to make the 10-year-old company profitable. Rumors have been rampant in recent days that the company is being considered for acquisition by several companies, most prominently the France-based streaming service Deezer.
“Eric [Wahlforss] 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,” Ljung wrote. “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.
“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.”
The service began in 2008 as a platform for DJs to upload mixes and became extremely popular with musicians for its ease of use and simple interface. However, the company soon came under pressure for royalty payments from record labels and publishers and in recent years has made an effort to become a paid service, albeit with very limited success. It has approximately 175 million listeners and a vast archive of music.
In March, the company confirmed the latest in a series of financial infusions, $70 million in debt funding from Ares Capital, Kreos Capital and Davidson Technology. However, it incurred a 51 million Euro loss in 2015 on revenue of 21.1 million Euros. In January Ljung expressed concern that “risks and uncertainties may cause the company to run out of cash . . . and would require [SoundCloud] to raise additional funds which are not currently planned” — concerns that were partially, although certainly not completely, allayed by the March debt-funding infusion. The company has also been hobbled by a long series of executive departures.
The new funding arrived after earlier reports that SoundCloud was considering a fire-sale exit because it hadn’t been able to raise the necessary money to continue its operations. It acknowledged the need for new capital, but denied that it was getting ready to sell for pennies on the dollar. “We are actively speaking with a variety of potential investors and other strategic partners,” SoundCloud told Variety at the time.
SoundCloud had raised $70 million from Twitter in June of 2016, after raising another $35 million of debt financing in January of last year.