Analysis

Rdio lays off staff to ‘improve its cost structure’


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rdioSad times at Rdio, which confirmed yesterday that it’s laying off staff as it grapples with the costs of running a streaming music service.

“Rdio confirmed making across-the-board workforce reductions today to improve its cost structure and ensure a scalable business model for the long-term,” a spokesperson told TechCrunch, which broke the story.

Numbers? Rdio isn’t giving any, but the report claims the layoffs affect between one fifth and one third of Rdio’s staff, with engineering particularly hit.

The company still isn’t giving any user numbers publicly, but provided TechCrunch with a statement claiming that “Since the end of last year (2012) we’ve tripled our number of new users. Also, 90% of our subscribers are now on the Rdio Unlimited tier ($9.99/month) giving them access to Rdio not just on the Web but also through their mobile phone”.

The news could be seen as a shock, particularly given anecdotal evidence of strong growth in user numbers this year, as well as September’s announcement of a deal for US radio group Cumulus Media to take a “significant” equity stake in Rdio while taking on the task of selling ads for Rdio’s free tier.

But taking Rdio’s layoffs statement at face value, yesterday’s news was about the brutal reality of costs in the streaming music world. Tomahawk’s Jason Herskowitz offered some mischievous maths on Twitter last night: “Note: Rdio says cost structure at 100 employees is not viable. Spotify at 1,000 employees,” before suggesting that “This holiday season is going to be go-for-broke by Google, Spotify and Beats” in the streaming market.

Rdio’s layoffs follow recent cuts at Rhapsody and Slacker in the US, and emphasise the sense that 2014 is going to require deep, deep pockets (or partners possessing them) to just survive in the streaming race. And prosper? Well, that’s a whole different can of worms.

Stuart Dredge

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