The firm\u2019s internal guidance shows that it\u2019s currently projecting annual revenues of EUR \u20ac288 million (USD $310m)<\/strong> for 2023, up 7.5% YoY<\/strong> <\/span>or 9% YoY<\/strong> <\/span>at constant currency (USD).<\/p>\n (SoundCloud GmbH,<\/strong> headquartered in Berlin, reports its financial numbers in Euros.)<\/p>\n Yet the bigger story for SoundCloud and its CEO Eliah Seton<\/strong> is that the company\u2019s EBITDA<\/strong> is moving into the black.<\/p>\n SoundCloud is forecasting a \u20ac2 million<\/strong> positive EBITDA for 2023, Seton tells MBW<\/strong>, representing a significant improvement from the \u20ac29 million<\/span><\/strong> negative EBITDA the firm posted in 2022.<\/p>\n What\u2019s more, says Seton<\/strong>, SoundCloud has now achieved eight consecutive months of profitability<\/strong> on an EBITDA basis.<\/p>\n \u00a0<\/span>\u201cReaching profitability matters because it reinforces that we are pursuing the right strategy and have taken the necessary steps to turn around the business,” Seton<\/strong> tells MBW.<\/p>\n “Reaching profitability matters because it reinforces that we are pursuing the right strategy.”<\/p>\n Eliah Seton, SoundCloud<\/span><\/p><\/blockquote>\n Although SoundCloud<\/strong> doesn\u2019t primarily consider itself a DSP for listeners \u2013 it also runs a significant creator services operation \u2013 the timing of the company\u2019s shift to profitability is foreshadowed by some interesting recent events.<\/p>\n Take Spotify<\/strong>. In Q3 2023, Daniel Ek\u2019s<\/strong> company posted a rare operating profit of \u20ac32 million<\/strong>.<\/p>\n What was even more rare? The rhetoric from SPOT<\/strong> that followed: after years of chasing growth over profitability, it was now shifting focus to the latter.<\/p>\n Spotify CFO Paul Vogel<\/strong> told the firm\u2019s investors in October that \u201cexpectations are now that we will consistently be in the black moving forward\u201c. (It\u2019s since been announced<\/a> that Vogel is leaving the business.)<\/p>\n For Seton, comparisons between SoundCloud<\/strong> and Spotify<\/strong> don\u2019t always tesselate neatly.<\/p>\n Still, he acknowledges that the music industry\u2019s biggest digital brands may be headed into an era where investors value annual income as much as they do shoot-for-the-moon ambition<\/strong>.<\/p>\n “As a profitable growth company, we now have the foundation to build the future of fandom and the fan-to-creator economy,\u201d he says.<\/p>\n Although we don\u2019t yet have final numbers from SoundCloud<\/strong> for its current financial year, we do have some additional color on what\u2019s been driving its performance in 2023.<\/p>\n The firm says that it\u2019s seen a 30% YoY increase<\/strong><\/span> in annual revenues from fan subscriptions \u2013 i.e. subscription payments from listeners as well as ad revenue generated by people pressing play \u2013 this year.<\/p>\n SoundCloud’s<\/strong> \u2018creator\u2019 business, meanwhile \u2013 i.e. fees paid by artists for access to distribution, tools, and services to market\/monetize their music \u2013 has seen 4% YoY growth<\/strong><\/span> in 2023.<\/p>\n SoundCloud\u2019s<\/strong> gross profit, according to its guidance, has shown 10% YoY growth<\/strong><\/span> this year, up from EUR \u20ac94 million<\/strong> in 2022 to EUR \u20ac104 million<\/strong> in 2023. The latter represents an annual gross margin of 36.1%<\/strong>.<\/p>\n One interesting accelerant behind SoundCloud\u2019s<\/strong> profitability this year? More efficient spending on marketing, people, and overhead.<\/p>\n SoundCloud<\/strong> was one of the first music industry companies to publicly announce a staff reduction in 2023 \u2013 a group of firms that this year have also included Warner Music Group<\/strong> and BMG<\/strong><\/a>.<\/p>\n
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