SoundCloud Downsizing To Avoid Running Out Of Money

In a move aimed at cutting costs, SoundCloud is laying off 40% of its employees as the music streaming service seeks a stronger financial footing as it encounters fierce competition from Apple Music and Spotify. The music streaming service will also be consolidating its operations in Berlin, Germany besides having another office in New York. Its offices located in London and San Francisco will be shut down.

“We need to ensure our path to long-term, independent success,” the chief executive officer and co-founder of SoundCloud, Alex Ljung, wrote online in a post which was published on the website of the company.

Burning through cash

Earlier in the year SoundCloud had revealed that it risked exhausting its cash reserves. In the cost-cutting move, 173 employees will be laid off out of a total number of 420.

Currently, the music streaming service boasts of worldwide listeners numbering 175 million. The company’s main advantage is its vast song library, podcasts, dance mixes and other content that is generated by users including established artists as well as amateurs. SoundCloud is especially popular among young people and some artists choose to give preference to the site by posting their content to the site first even before its sampled elsewhere. This includes Chance the Rapper and other artists. Record labels are also known to use the service when scouting for new talent.

Business failure

Despite the popularity of the streaming service, SoundCloud has failed to become a successful and sustainable business. Most of SoundCloud’s content is free and a subscription-based premium service that was introduced in 2016 did not take off as had been envisioned by the company’s executives. In the recent past the company has considered selling itself to Spotify and Twitter though nothing materialized.

According to a New York Post report that appeared earlier this month, SoundCloud has become an acquisition target of its rivals and Apple Music is one of the interested parties. Currently, Apple Music is trailing Spotify in subscriber numbers. While Spotify has over 50 million subscribers who pay a monthly fee, Apple Music has a subscriber base of 27 million.

Sector challenges

The inability of SoundCloud to build a sustainable and successful business is a reflection of the challenges that face the entire music industry. Though the biggest record labels in the world have for the first time in decades begun enjoying sales growth following the shift by consumers to streaming services, the streaming firms have not had the same success.

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