Pandora is laying off about 5 percent of its workforce as it shifts to more automated ads

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In the same month that streaming music company Spotify filed to go public, its US rival Pandora is feeling the pinch of how challenging the digital music business continues to be.

The company today announced that it is laying off about five percent of its employee base as it switches to new services automating some of its advertising and marketing, investing in more non-music content, and with “other cost-saving measures”, with a goal of saving $45 million annually.

According to Pandora’s 8-K filing, employees were notified today of the plan and the company expects the staff reduction of about five percent to be complete by the end of Q1 2018.

“As I shared last quarter, we know where and how to invest in order to grow,” Pandora CEO Roger Lynch said in a press release. “We have an aggressive plan in place that includes strategic investments in our priorities: ad-tech, product, content, partnerships and marketing. I am confident these changes will enable us to drive revenue and listener growth.”

We’d heard murmurs of the layoffs coming in the last several days, with sources pointing to reductions in two specific areas, advertising sales and client services, “due to weakened advertising sales,” according to one person.

The company earlier today announced that it would be reporting its earnings on February 21, so we’ll see a more complete picture then, but the fact that the company emphasized adtech and audience development in its announcement today is one sign of how it’s hoping to improve things with a shift to automated services and fewer people to run them.

Pandora also announced plans to expand its presence and workforce to Atlanta, although it did not specify how many employees would be added there and in what areas of its business.

Notably, the company also laid off staff last January.

Pandora’s restructuring comes at a critical juncture in the music streaming business. With Spotify preparing to go public, many are wondering if it will be able to use its larger and more global scale to produce a more viable business model for the industry.

In any case, its growth could increasingly start to impact Pandora’s fate: just today it emerged that Spotify is now testing a Pandora-like app based around playlists, giving Pandora users another reason to jump to Spotify without losing one of the core features of the Pandora experience.

At the same time, there continue to be developments that will whittle away at Spotify’s, Pandora’s and other streaming companies already thin margins. Just this past weekend, it emerged that the Copyright Board will be increasing the fees that songwriters will be due from streaming to 15.1 percent, up 40 percent from their previous cut.