Report: Music Industry Showing Signs of Economic Distress

The economic storm clouds that have triggered layoffs and deep cuts to investment budgets at companies like Netflix, Snap and Apple are coming to the music business, according to Billboard.

In recent months, Spotify said it would cut hiring by 25%, SoundCloud laid off 20% of its staff and BMI said it was cutting just under 10% of its total workforce, through a combination of letting 30 people go and leaving certain jobs unfilled.

In memos to staff, the companies cited uncertain economic times and challenging conditions in financial markets. Fears of a recession in the United States have been hovering over capital markets and investors since the Federal Reserve began aggressively raising interest rates earlier this year. The effort to rein in inflation, which hit a 40-year high in June, has cooled markets as intended but has also proved difficult to control.

Investors are hoarding cash and insiders at song-catalog holding companies say it’s difficult to raise capital, as the U.S. stock market had its weakest August in seven years.

These dour economic factors have been upended somewhat by record hiring and wage increases — signs of a strong labor market. A slight uptick in unemployment in August is one sign the labor market may be cooling, and it could give the Federal Reserve room to raise interest rates at a less aggressive pace. But many companies have already braced for the worst.

“Making changes that affect people is incredibly hard,” SoundCloud chief executive Michael Weissman wrote in a memo to staff announcing layoffs on Aug. 3. “Today’s change positions SoundCloud for the long run and puts us on a path to sustained profitability.”

SoundCloud previously cut around 40% of its workforce in 2017, but hired hundreds more in the years following. Between 2017 and 2022, it also raised nearly $250 million from investors including The Raine Group, Temasek and Pandora parent company SiriusXM.

Spotify, meanwhile, grew its employee base by 50% just in the last two years, going from 4,405 workers at the end of 2019 to 6,617 at the end of 2021

Representatives for SoundCloud, BMI and Snap declined to comment. Spotify did not respond to requests for comment.