Deezer closing its Canadian office as it moves to cut costs from tight streaming music margins

Deezer Canada has closed its Canadian wing and laid off its small Toronto team. Managing Director Justin Erdman, the man enforced with bringing Deezer into the limelight, has been let go, citing a move by the French company to consolidate its North American arm. Service in Canada will be unaffected, according to a company representative.

When we last checked in with Deezer, it was approaching one million Canadian users and had just launched a free ad-based tier, meant to drive user acquisition in a more sustainable way. “Our churn rates are very low,” Erdman told me in April, “and once [a user] stays for three months they tend to stay for a long time.”

Deezer isn’t the only company to shut down its Canadian operation without actually leaving the country; Rdio did the same thing last year, now pursuing most of its worldwide expansion from its San Francisco offices. At the time, Rdio was in the midst of finding a new CEO, and eventually turned to former Amazon Video exec, Anthony Bay, as a saviour.

Like Rdio, and despite the relative hockeystick growth of streaming in general, Deezer’s issue is turning triallers into paid users. For the last few months, it has offered its Premium+ service, which includes mobile streaming and offline caching, at $4.99/month, half of what competitors like Rdio, Spotify, Slacker, Beats and Google charge.

While the move to consolidate its North American offices is unlikely to mean that the company is struggling — it raised $130 million in late 2012, and could likely raise more if necessary — it points to the difficulty of streaming music startups pitching a permanent tent on Canadian soil.

Songza, whose native ad model is tied to the presence of a local sales team, has actually grown its Canadian outfit in recent months, but the free, ad-based service is quite different to Deezer’s or Rdio’s. With its $39 million purchase by Google, though, it will be interesting to see whether the Mountain View-based company maintains its presence in Canada for much longer.