Swedish music service Spotify announced a 6% cut from about 10,000 employees. Bloomberg writes about this.
Looking back, I realized that I was too ambitious to invest in our revenue growth. And for this reason, today we are cutting our staff by about 6%,» said Spotify CEO Daniel Ek.
Ek added that in the next few hours «one-on-one interviews will be held with all affected employees».
The company did not specify which departments would be affected by layoffs.
In 2017, Spotify employed about 3,000 people. By the end of 2022, this number had more than tripled.
Spotify, listed on the New York Stock Exchange, rose by more than 4.5% on the back of the announcement.
In recent years, the company has invested heavily in the development of new markets and exclusive content. Spotify spent more than $1 billion on podcasts alone, and sparked outrage last year when it signed a multi-year $100 million deal with scandalous blogger Joe Rogan.
Despite the success of the online music market, the company continues to suffer losses. According to Ek, Spotify operating expenses are twice as high as revenues.
«This would be unsustainable in the long run in any climate, but in difficult macroeconomic conditions it is even more difficult to close the gap,» he said.
The company’s annual turnover in 2021 reached $10.4bn.
During the presentation of its Third Quarter Earnings Report 2022, Spotify reported 456 million active users per month, of which 195 million are paid subscribers. They account for most of the company’s income.
By 2030, Spotify plans to increase the number of users to 1 billion.
Although I think this is the right decision, I understand that given our historical focus on growth, many of you will see it as a shift in our culture,» said Ek.
Earlier, Alphabet announced massive cuts.
Currently many companies is cutting their staff, as the market boom is significantly decreasing. During and after the pandemics companies started to employing enormous amounts of employees, hoping for a long-term industry development, but todays situation shows as that they had overestimated the possible development and that’s why they have to fire so many employees.
Layoff are very common in recent years. I think that companies are finally releasing that most of the people that they have hired throughout recent years aren’t needed, I mean how many people to you need to make some presentation that provide no value. Even though its sad that people are loosing their jobs, it has been a long time in the making.
In my opinion, Spotify’s decision to cut 6% of its workforce, or about 600 employees, is a necessary step for the company to become sustainable in the long-term. Despite the success of the online music market, the company has been suffering losses, and operating expenses are twice as high as revenues. Spotify has been investing heavily in new markets and exclusive content, such as podcasts, but this has not been enough to make the company profitable. The company’s CEO, Daniel Ek, acknowledged that the cuts will be difficult for employees but that it is the right decision for the company’s future.