Continued losses and only modest optimism about its new subscription service have SoundCloud on the ropes
A report Sunday has confirmed the simultaneous departure of SoundCloud COO Marc Strigel and Finance Director Markus Harder from Berlin-based music streaming startup SoundCloud.
The news was first reported and confirmed by The Financial Times (paywall). Now former COO Strigel joined the company back in 2011 while Harder came over in 2012.
The departures follow abysmal news for the company’s finances. SoundCloud’s earnings report in early January cast a frank and dim picture for investors as net losses outpaced its revenue growth.
SoundCloud launched a $9.99-per-month digital subscription service SoundCloud Go in 2016 in the US, UK, and Germany. CEO Alexander Ljung was bleak in saying that if that newly launched offering were a bust, the company’s viability might be at stake.
“The risks and uncertainties may cause the company to run out of cash earlier than that date, and would require the Group to raise additional funds which are not currently planned,” Ljung said last month. “These matters give rise to a material uncertainty about the Group’s ability to continue as a going concern.”
SoundCloud recent filings report 21.6 percent in revenue growth to €21.1 million($22 million), but net losses deepening 30.9% to €51.22 million (about $52 million).
All of this news will only fuel speculation the company might look to sell, reflecting bad fortunes among its competitors Spotify and Pandora. According to Fortune, Spotify pays 85 percent of its revenues to licensing deals, while Pandora is reportedly looking at an acquisition by SiriusXM following its own expensive acquisition of bankrupt music company Rdio.
The company’s Chief Product Officer Eric Wahlforss, who only recently shifted from his position as Chief Technology Officer, told the Telegraph last month the company had shifted its business model to become more “sustainable.”
“Asking listeners to pay to access the full catalogue of content, plus new features – on top of all the content accessible for free, via our ad-supported offer – allows us to pay artists, as well as enabling us to build a sustainable business.
Update: A spokesperson for SoundCloud has responded to the report with a strong denial that there is any link between recent earnings reports and recent departures.
“The Financial Times relies on one anonymous source to tell an inaccurate story about SoundCloud. SoundCloud is currently fundraising, which is typical of most startups of our size and in our phase of growth. That the Financial Times would compromise its journalistic standards to include an anonymous quote characterizing this normal course fundraising as “desperation” is disappointing and surprising for a newspaper of record,” SoundCloud’s spokesman communicated to Geektime.
“As we communicated clearly to the Financial Times, two executives have left the company after five years to pursue new opportunities. This is unrelated to our normal course fundraising efforts, which are being led by our recently appointed Chief Financial Officer, Holly Lim. SoundCloud remains in a position of strength and is confident in its long-term prospects as it continues to be the go to platform for the creative community.”