Home / Tech / How music streaming service SoundCloud finished up on the margin of extinction

How music streaming service SoundCloud finished up on the margin of extinction

SoundCloud cofounders
SoundCloud cofounders Eric
Wahlforss and Alex Ljung.

Instagram/Eric Wahlforss

“Two weeks ago we changed from Scotland to Germany to start a new
pursuit as an iOS operative at SoundCloud,” wrote Matthew Healy on
the Hackernoon website on Jul 10. “On Monday of last week I
started that job. By Thursday dusk I, along with 172 of my new
colleagues, was strictly being laid off.”

“Why was a business that was about to cut 40% of its workforce
still employing so aggressively?” he asked.

It’s a doubt that Healey and many other SoundCloud employees
are still struggling to understand. 

Reports started to seem online on Jul 5 that
said SoundCloud was about to cut its 420-strong
workforce by 40%. Bloomberg had review a
breeze blog post in which SoundCloud CEO Alex Ljung
explained that the company was vouchsafing go of 173 staff, and
shutting down its
offices in London and San Francisco (leaving only
offices in New York City and Berlin) as partial of an bid to
revoke costs at the company whose waste have been arching out
of control. 

“Nobody saw it coming,” a SoundCloud employee, who wishes to
sojourn anonymous, told Business Insider. “It was a sudden

Those that sojourn at the company could be forgiven for feeling
nervous. SoundCloud’s existent cash pot will only lift it
by to the fourth entertain of the year, which is reduction than 50
days away, according to sources cited by
TechCrunch. SoundCloud has attempted to downplay the
TechCrunch report, nonetheless the company reliable last week that
it is in the routine of
trying to raise more capital. 

The leaked blog post that Bloomberg saw was fast published onto
SoundCloud’s website and there have been two company
all-hands meetings since. 

SoundCloud CEO Alexander Ljung
SoundCloud CEO Alex


During last week’s all-hands assembly — held on Jul 11 and
monitored by a series of confidence crew —
“SoundClouders” were looking for answers as to since the company
had to unexpected lay off almost half of its staff.

Staff wanted to know since they hadn’t been warned that cuts
were on the way, and the remaining employees wanted
declaration that the cost reductions would keep the company in
business for the foreseeable future. 

“The all hands currently was positively horrible,” another SoundCloud
employee, who also wishes to sojourn anonymous, told Business
Insider shortly after the meeting. “[There were] no
genuine answers and [they were] politically avoiding questions.”

Ljung and cofounder Eric Wahlforss ostensible “no tenure of the
shortcoming and no entrance of fault,” the source claimed,
adding that they also catastrophic to state either there would be
any repercussions for the executives that have led
SoundCloud into the gummy position it now finds itself

SoundCloud was born in Stockholm and lifted in Berlin

SoundCloud was founded in Stockholm, Sweden, in Aug 2007. It
launched in 2008 and started out as a cool, indie height for
people meddlesome in finding the latest and biggest new

“We build an online audio height that’s used by people working
with music to be means to receive, send, and discharge their
music,” Ljung pronounced in a YouTube video uploaded in October
2008 when SoundCloud had around 25,000 users.

“They use it on a daily simple to be means to get files they’re
operative on over to other people … or to be means to take their
finished marks and get them out to people who then sell the
marks or to other social networks. What we’re fundamentally doing in
the prolonged term is trying to build a cloud-based audio platform
that anybody who is involved with music can work with.”

The founders met while study at
KTH Royal Institute of Technology in Stockholm, which has a
repute for being one of the world’s best computer
scholarship universities. They bonded over a shared adore of
music and motionless to create a height that was something like
Flickr or WordPress but for sound.

“We both were operative in music and one way or another we used to
be a sound operative for films and Eric used to recover music,”
Ljung pronounced in the same YouTube video. “We had a lot of trouble
trying to combine with people. Trying to use the web and
getting sent music all the time. Getting it to the inboxes and
getting the weird FTP logins. One day we realised OK it’s
actually irritating when people send us new music they’re working
on when that should be like a really happy moment.” 

Eric Wahlforss and Pharell
SoundCloud cofounder Eric
Wahlforss (right) and Pharrell Williams.

Instagram/Eric Wahlforss

Shortly after environment up the company, the founders moved
SoundCloud to Berlin, which was building a repute as one of
the many startup-friendly cities in Europe at the time, partly
due to its inexpensive accommodation and its contentment of talented

“If we demeanour back 10 years ago, Berlin was a nascent [startup] ecosystem,” Wahlforss pronounced at
a startup eventuality in March. “It didn’t have all of the
infrastructure in place, but it positively had some of the raw

The company became one of Berlin’s most-loved startups and
in May 2014, SoundCloud was reported
to have held the eye of Twitter, which was
deliberation shopping the platform. Twitter had already tried
to launch a music product to get people to stay longer on the
but the try failed.

Ultimately the Twitter talks fell
through. This is suspicion to be partly since SoundCloud
wanted a understanding worth $1 billion (£770 million) when
its valuation was only $700 million (£386
million). It could also be because, despite its best
efforts, SoundCloud had been tormented by copyright
infringement issues. 

SoundCloud was constantly battling with the major music

In May 2015, Sony Music pulled music
by several pivotal artists from SoundCloud after the label
decided it wasn’t making adequate income from music hosted on
the streaming site. Original recordings from Sony artists like
Adele, Kelly Clarkson, Miguel, and Hozier were removed. They were
later added again after
SoundCloud negotiated a new understanding with Sony Music. 

In Aug 2015, SoundCloud was
sued for not profitable musicians royalties. In an email
sent to its members, the Performing Rights Society for Music (PRS
for Music) announced that it felt it has “no choice but to
embark authorised proceedings,” following “five years of
catastrophic negotiations.” 

By Nov 2015, loyal SoundCloud users were
starting to remove faith in the site as it shifted from a
hangout for DJs and radio hosts to a blurb platform.
Users said the music streaming app and website had
strayed from its progressing concentration on supporting DJs and felt
that it was foul stealing calm and focusing on
high-profile users and protected music. 

At the time, Business Insider spoke to Chris Reed, famous as
Plastician, owner of the Terrorhythm Recordings music
tag which he launched in 2002. He pronounced that he “had
trouble” with a lane on his personal SoundCloud form as
good as the form of his record label. “I own all the rights to
it, it contains no illegal samples, and we even own the publishing
to it,” he said. “So we was really confused as to since this is

Adele auckland new zealand
Adele had her music private from SoundCloud during a brawl with
the service.

Phil Walter/Getty

Over time, the company managed to successfully negotiate
deals with many of the major record labels — but this didn’t come
cheap. SoundCloud had to scapegoat some of its equity in the
routine but bringing the major labels on house helped it to
contest with the likes of Apple Music and Spotify.  

Today, the company has deals with all 3 major music labels:
Sony Music Entertainment, Universal Music Group, and Warner. In
the process, it’s given divided a poignant volume equity, with
3-5% going to
Warner and presumably some-more going to

SoundCloud introduced ads and a reward service

SoundCloud claims to have around 175 million listeners who can
tune into listen to some-more than 150 million pieces of content.
For many of its life, it was totally free and had no revenue

It introduced advertisements in mid-2015 brazen of the launch of
its £9.99 SoundCloud Go subscription streaming
service, which
launched in Mar 2016 to contest with Spotify, Apple
Music, and Amazon Music. There’s also a cheaper
£4.99 option that allows users to listen to calm but ad
interruptions but they don’t get entrance to all of the music on
the platform. 

The deals with the major labels are what allowed Spotify to
launch its premium service. That radically means the
company was forced to give divided chunks of equity to launch
its music streaming service. 

SoundCloud Go

But ultimately, SoundCloud remains
unprofitable. The last official
numbers show SoundCloud incurred a €51 million (£45
million) detriment in 2015, aloft than the €39 million (£35 million)
detriment it available in 2014. The company’s revenues in 2015 were €21
million (£19 million). 

During 2015, SoundCloud’s headcount grew by 25%, up from 236 to
295 people. A Companies House filing shows that it spent
€26.77 million ($28 million, £23 million) on income and salaries
in the year. That meant the normal annual income at the
company hit €90,729 ($95,000, £77,000) in 2015 – up 19% on the
€75,979 ($80,000, £65,000) normal salary paid out to staff in

Soundcloud revenue
Business Worldwide


New staff were hired even yet pursuit cuts were imminent

One major indicate of row is the fact that SoundCloud
hired a series of people into roles over the last few months
meaningful full good that they were going to have to make large
redundancies, according to TechCrunch. 

Developer Vojta Stavik and his partner were formulation to pack
up their lives in Prague and move to Berlin
where Stavik was formulation to take his dream pursuit at
SoundCloud. He and his partner were formulation to let go of
their apartment, say goodbye to their friends and
family, and relocate to the German capital.

Stavik was due to start on Jul 17 but his engineering role was
axed on Jul 7. He told Business Insider on the day he was
due to start: “I’m moving there this week by my own without
having any sole job.”

Stavik practical for the pursuit at SoundCloud in April. In May, after
a 20-minute Skype call and a remote coding assignment that he
spent 20 hours on, SoundCloud flew him to Berlin for a series of
interviews and tests. He was offering a pursuit at SoundCloud two days
after his outing to Berlin

“I was super happy and vehement about moving to Berlin!” Stavik
wrote in a blog post
explaining the routine on Jul 9. 

SoundCloud told Stavik that it would yield him and his
girlfriend with proxy accommodation for their first few
weeks in Berlin. They were ostensible to get the keys on July

Factory Berlin Mitte
SoundCloud leases the top 3 floors of Factory
Berlin but it is formulation to downsize, according to someone with
trust of the matter.


On Jul 6, Stavik saw a report about the pursuit cuts at the company.
He immediately sent an email to the recruiter asking whether
they influenced him.

On Jul 7, he perceived an email from the relocation group saying
it had paused his relocation routine and it was
watchful for SoundCloud HR to yield it with more
information. The company also told him that everybody at
SoundCloud had been given a day off to routine the news. “That
was the moment when we realised that I’m substantially screwed,” Stavik
wrote on his blog. 

“For the whole day, we was promulgation emails to every hit person
at SoundCloud we had, asking them about my designed start day,
having no response.” 

Finally, at 8pm that evening, SoundCloud arch technology
officer Artem Fishman called him up and told him his pursuit has
been cancelled. “I told him we already quit my job, let my
unit in Prague go, and was ostensible to pierce to Berlin in
just a few days! we also asked him about the possible
compensation. The response was negative.”

Stavik claimed that Fishman said SoundCloud wanted to
act like his focus never happened. 

Stavik is now on the hunt for a job in Berlin. 

Elsewhere, program operative Matthew Healy wrote a blog post
on titled: “My week at SoundCloud.” 

In the post, Healy said: “Two weeks ago we changed from Scotland to
Germany to start a new pursuit as an iOS operative at SoundCloud. On
Monday of last week we started that job. By Thursday dusk I,
along with 172 of my new colleagues, was strictly being laid

Healey had secured a franchise on an unit and sole many of
his effects in sequence to pierce to Berlin to work for

“I had my first day at SoundCloud on the Monday before we signed
that lease. It was a ridiculous start to a new job. First,
there was the requisite branded swag: a t-shirt, a water
bottle, a span of headphones, all in a branded receptacle bag. Then
there was the bureau itself: an implausible space where every
fact had been considered, with free snacks and drinks, and an
espresso machine. we couldn’t trust how propitious we was to work

“Eleven other people started with me. Around the office, people
were revelation us it was the biggest intake in months.”

Stavik, Healy, and many other SoundCloud staff have combined their
names to an open spreadsheet
of SoundClouders for hire. Recruiters that are meddlesome in
employing the laid off SoundClouders are also adding their names and
sum to a apart page on the spreadsheet. 

reports that SoundCloud’s founders told staff
during one of the post-redundancy all-hands meetings that
investors had asked them in Mar to make the pursuit cuts as
partial of a $70 million (£54
million) debt funding deal that was first
reported by Business Insider. SoundCloud was reportedly
forced to lift the debt appropriation after it catastrophic to lift $100
million (£77 million) in venture funding. 

Several top tier executives left SoundCloud in the months leading
up to the pursuit cuts, presumably since they knew they were on the
way. SoundCloud’s
COO and financial executive both left the company around
February, while maestro SoundCloud employee David Noël left in

During a fireside discuss with TechCrunch editor at vast Mike
Butcher in Berlin on Jul 12, Ljung delicately dodged questions
that staff would no doubt adore to know the answers to.

“We were employing people up until we shifted strategy,” Ljung said
at the Tech Open Air conference. “We work in many different
countries. In some countries it takes a prolonged time for people to
be hired.” 

SoundCloud CEO and Mike Butcher
Mike Butcher interviewing SoundCloud CEO Alex

Tech Open

SoundCloud is desperately trying to lift some-more income as cash
pot dwindle

The company’s stream cash pot will only last until the end
of the fourth quarter, according to TechCrunch sources.
Ljung reliable on Jul 12 that he’s in the routine of
trying to lift some-more income for the company after he was asked
about a rumoured $250 million (£193 million) appropriation round. 

Ljung regularly pronounced during his talk with Butcher that he
was austere on building a clever and eccentric music streaming
height and refused to criticism on Google and Spotify acquisition
rumours. The Financial Times
reported last Sep that Spotify was in “advanced
talks” to buy SoundCloud for $1 billion (£770 million), while
Music Business
Worldwide reported in Jan that Google was mulling an
merger that was likely to be in the sequence of $500 million
(£386 million). 

“It’s a very unhappy eventuality to let go of these people but if we zoom
out and demeanour at the whole company right now, we consider people are
blank a couple of pivotal points,” Ljung pronounced in Berlin. He
highlighted how SoundCloud was the twentieth most-downloaded
app in the US App Store on the day before the interview. “We have
an huge user bottom and very good growth. Very good engagement
too. Everything in terms of the business and user metrics is

“Now is the time where we have to take some-more control over our
situation,” he said. “We’re in the routine of shortening the cost
basement significantly. We’re holding some-more control of the own
future and ensuring the independence.”

Chance the Rapper: ‘SoundCloud is here to stay’

On Jul 13, as rumours circulated that SoundCloud was close to
using out of money, hip bound artist Chancelor
Bennett (a.k.a Chance the Rapper) wrote on
Twitter: “I’m operative on the
SoundCloud thing.” The next day, he followed up with
another twitter that read: “Just had a very cultivatable call with Alex
Ljung. @SoundCloud is here to stay.” 

What was pronounced on the call isn’t known.
Some people speculated that Bennett’s mysterious
tweet meant that he had given SoundCloud some
while others speculated that he competence be shopping the service.
It wouldn’t be the first time a solo artist has bought a music
streaming height — Jay Z
acquired Tidal in 2015. 

Chance the Rapper
The Rapper performs onstage during the iTunes festival at the
Roundhouse in Camden, north London, Friday, Sept 30,

Photo by Joel

A representative for SoundCloud reportedly told
Variety that the rapper is “essentially swelling good vibes
about the company during a severe time.” The
representative combined that they were unknowingly of a some-more material

Shortly after Bennett’s tweet, a post from Ljung seemed on
SoundCloud’s blog. It read:

Hey everyone,

There’s an violent volume of sound about SoundCloud in the world
right now. And it’s just that, noise. The music you adore on
SoundCloud isn’t going away, the music you shared or uploaded
isn’t going away, since SoundCloud is not going away. Not in
50 days, not in 80 days or anytime in the foreseeable future.
Your music is safe.

Along with any of you, we’ve built this implausible creative
village of artists, podcasters, DJs, producers and some-more who
are the pulling force in pulling enlightenment brazen in the world.
That’s not going to change. Last week we had to make some tough
decisions to let go of some of the staff, but we did this to
safeguard SoundCloud stays a strong, eccentric company.

Thank you for the escape of adore and support. Some of you
have asked how you can help–spread the word that we’re not
going anywhere and keep doing what you’re doing–creating,
listening, uploading, sharing, liking, and finding what’s
new, now and next in music. SoundCloud is here to stay.


SoundCloud cofounders continue partying, despite the layoffs

It’s protected to assume that the last two weeks have been among the
many formidable for SoundCloud since it was

But SoundCloud’s cofounders seem to be trying to lift on as
normal. Both cofounders have attended parties in Berlin over the
last couple of weeks, with Wahlforss co-hosting one with his
wife last Thursday at a farming site just outward Berlin. He
refused to answer Business Insider’s questions at the party,
saying: “I don’t wish to do an interview.”

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