Buzz, Europe, TC

After big layoffs Soundcloud founder says its strategy is now to “take back control”

At Tech Open Air Berlin Soundcloud co-founder Alex Ljung gave his first major public interview to me today.

In the interview he batted back claims that Soundcloud (SC) is facing tough times, insisting that by drastically cutting headcount by 173 people recently and closing two major offices, Soundcloud is on its way to “taking back control” of its destiny, and remaining a major independent force in the music and tech industry. He also hinted that new products were being planned and championed Soundcloud’s still unique ability for artists to upload their music and be discovered, unlike the major music streaming platforms such as Spotify, Apple Music and Deezer.

“We had to lay-off 173 people from our team, or 40% of Soundcloud. All of them are incredible people. It’s incredibly sad. But we’re very focused on doing what we can to support them,” he said.

“We saw the amount of support [for these people] from the SC community. They produced a google doc themselves, which SC is also supporting. I wasn’t concerned the news [about the layoffs] leaked, because at that moment I had to deal with telling the company, which was more important.”

I suggested to him that SC was rumoured to be still hiring people as close to two weeks before the announcement. He suggested that this was just circumstantial: “This is part of a shift in strategy. We [often] hire people in several countries and it takes a while before they join the company.”

Soundcloud turned over €21.1m in revenue in 2015 – up 21.6% on the prior year. However, in the same period, operating losses widened 25% to €48.6m – as net losses accelerated 30.9% to €51.2m. Operating losses are more than double the size of that compared to revenue. By cutting staff and closing offices they’ve achieved a total saving of €16.9m. So, surely this is a problem? They still have a big gap between revenue and profitability.

Ljung was combative: “We’re one of the largest music platforms in the world. Even just yesterday we were in the top 20 of all the app downloaded in the app store. So we still have an enormous user base and growth and engagement. So the platform is still growing. Creators are huge on the platform. The numbers of tracks are still growing. So everything in terms of the business is doing well.”

He said they have many more music licenses, and now ad revenues, subscriptions from Go and Go+ products.

But, I asked, could they have not foreseen these coming problems earlier?

“We decided we’re going to grow our way into this. We doubled revenues in last 12 months. We decided we would take more control. We laid off 173 people, that’s a considerable cost saving, consolidated offices, our users are going up, revenues are doubling and the reason for this is we’re taking more control of our own future, creating a path to profitability and ensuring our independence at Soundcloud.”

He refused to answer if they had previously been trying to raise a rumoured $250m, but did say: “We are fundraising at this point but that’s not as interesting as music on the platform…”

“We have licenses with pretty much the entire music industry and are very supported by the entire music industry. We’re monetising content for the industry. And these days we have emerging talent on SC. The music industry is supportiver”

I put it to him that not all in the industry were supporting: They compete now with Spotify, Deezer etc

“We are building an independent SC which is completely unique. You can can find artists there that don’t exist anywhere else. Many are the next ones to accept Grammys. There is tremendous financial and cultural impact on SC. It will stay strong.”

But he continually batted away rumours of an acquisition.

I put it to him that SC could have built a truly disruptive force, against the old-fashioned music industry. Why didn’t they do it?

“The truth is some artists get lots of support from the established industry
and some do it all by themselves. SC is for all those artists. We wanted to work with the music industry not against it. Artist independence and control is at the heart of SC.”

“The last 10 years, have been incredibly exciting. You don’t have to go to a major label because of SC. That allowed artists to share, and it created options for them [they didn’t previously have].”

So what of the future?

“We are incredibly strong with creators, that will continue to be a focus. We’re are also one of the largest listener platforms. Revenue is growing fast. For the future we’re going be doing less things that other people are doing and more things which will be completely unique to SC.”

“We’re finally at a point where music industry streaming revenue is growing rapidly. Outside of that we still have a world where MOST people are NOT streaming music. But streaming is here to stay. Most people will now move to streaming over the next 10 years.”

“If you zoom out, streaming is really picking up speed. There are several platforms doing very well. For the music industry it’s great but most have the same $9.99 model. They have all come to the market with a very similar offering for new subscribers in the market.”

“As the companies are competing, a lot of the users are using all these platforms but they are ALSO using SC as well because they can get something there they can’t get anywhere else. Plus you can interact directly with the artists.”

He hinted at the fact that Soundcloud is doubling-down in the fact that musicians can upload themselves.

Lastly I asked him how he was.

“To be honest, I’m a little tired,” he said, before coming back with a big exhortation of Soundcloud’s ability to find new musicians.

I looks like we’ll have to see how this record plays out to the end.

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