SoundCloud, chasing profitability, cuts another 8% of employee headcount

SoundCloud is reducing its current global staff headcount by 8%, in a move that will see around 40 people laid off at the company.

It’s understood that the majority of layoffs at the firm will take place in the US.

The news was confirmed today (May 23) in an internal memo to staff from SoundCloud CEO, Eliah Seton, obtained by MBW.

Seton pointed to SoundCloud’s long-held ambition to become profitable as a factor in the re-organization.

Calling the layoffs “simply the hardest thing we can do in our business”, Seton’s memo continued: “This is a challenging but essential decision to ensure the health of our business and get SoundCloud to profitability this year. In doing so, we are securing the company’s future for the millions of artists who rely on us for their living and their self-expression, and the millions of fans who come to SoundCloud for the joy of music.

“It is critical to ensure that SoundCloud thrives in our mission to influence culture, be the preeminent home for artists and fans and lead what’s next in music.”

SoundCloud’s latest round of redundancies comes nine months after the company reduced its then-global headcount by around 20% under then-CEO, Michael Weissman.

Sources close to SoundCloud’s investors have recently indicated to MBW that the firm – whose current shareholders include SiriusXM and Raine Group – is in the preliminary stages of exploring a potential investment event, or even a sale, over the next 12 months.

A move from the company to quicken its path to profitability would certainly fit with that idea.

The last major investment event at SoundCloud saw SiriusXM take a minority stake in the company in Q1 2020, via a USD $75 million deal.

(Coincidentally, SiriusXM also recently cut 8% of its global workforce in a round of redundancies.)

According to recent media releases, SoundCloud’s service today hosts over 320 million tracks from 40 million artists.

In its last published annual fiscal results – for the calendar year of 2021 (two years ago) – SoundCloud, which is headquartered in Germany, posted EUR €230.7 million (USD $273m) in annual revenues, up 19.2% YoY.

The firm’s gross profit in the year grew by 33.7% YoY to €81.7 million ($97m), but its annual operating loss widened to €21.1 million ($25m) from €15.4 million in the prior year.

Regarding those widened losses, SoundCloud explained in its annual fiscal filing for 2021: “Significant investments were made in our operating infrastructure in 2021, including a reconstitution of the executive team with new experienced executives from the music and entertainment industries.

“Further, marketing spend was increased substantially (+70%) to drive targeted revenue growth, but [that spend] was slightly under plan.”

In December 2022, SoundCloud’s Eliah Seton told MBW: “We really believe the next big format for the music business is fandom. Today’s music business doesn’t work for most artists; streaming alone is not enough [financially] for most artists.

“Optimizing and commercializing fandom is going to be all-important to unlocking a music business that does work for most artists.”

SoundCloud’s recent moves have seen the company double down on this strategy.

Earlier this month, SoundCloud announced a new deal with Merlin which would enable the latter org’s members to participate in SoundCloud’s Fan-Powered Royalties (FPR) model.

FPR, an example of a ‘user-centric’ royalty model, allocates a share of each listener’s subscription and advertising revenues only to the artists/tracks they individually listen to.

Merlin members including Amuse, Cinq Music, Foundation Media, IDOL, Secretly, Symphonic Distribution, and Too Lost are all participating in the SoundCloud FPR program.

SoundCloud has previously inked a deal with Warner Music Group that enables WMG’s labels and artists to be paid royalties from the platform via FPR.

Another “fandom”-centric announcement from SoundCloud also arrived in the past month, when the company took the wraps off its ‘Fans’ tool.

Having already been used in beta by 10,000 artists – including Warner Music Group artists – Fans enables acts to direct message (DM) superfans with the option to attach a track to these communications.

The development of Fans has been led by former Twitch and Spotify exec Tracy Chan, now SVP of SoundCloud’s Creator business.

In other recent news at SoundCloud, MBW discovered last month that Lauren Wirtzer-Seawood, the firm’s Chief Content & Marketing Officer since 2021, was leaving the company.Music Business Worldwide