January 27, 2023

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After other Internet giants, Spotify cuts 6% of its workforce



The world’s number one audio platform, Spotify, announced on Monday January 23 the reduction of 6% of its workforce, or nearly 600 jobs, the latest episode in a series of major layoffs among the Internet giants to reduce their costs.

The layoff plan is the biggest in the young history of the Swedish flagship with half a billion users, a start-up founded in 2006 in Stockholm and which has become one of the few big European names in tech.

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In a message to employees and posted online, his 39-year-old boss, Daniel Ek, acknowledged “a change of culture” after years of prioritizing growth over profits.

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“In hindsight, I was too ambitious by investing faster than our turnover growth”acknowledged the CEO and co-founder of Spotify. “For this reason, we are reducing our workforce by around 6% across the group”, explains the boss of the group listed in New York. Individual interviews will take place with the employees concerned on Monday, he said. The social plan should cost 35 to 45 million compensation.

At the opening of the New York Stock Exchange, the action of the group, barely lately, gained 4.6% to 97.91 dollars. If Spotify has been profitable from time to time, the Stockholm-based group has been steadily posting losses for several years, despite a dazzling growth in the number of its subscribers and a lead over its competitors such as Apple Music or Amazon Music. In the third quarter, the group, which is due to publish its annual results next Tuesday, widened its net loss to 166 million euros.

“As you know, we have made a considerable effort in recent months to reduce our costs, but it has simply not been enough”, justified Daniel Ek on Monday. According to the Scandinavian billionaire, Spotify’s investments have increased twice as fast as its revenues last year.

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“Untenable”

“That would be unsustainable in the long term in any context, but in a difficult macroeconomic environment, it will be even more difficult to plug the hole”he points out.

Spotify has also invested more than a billion euros in the podcast in recent years, becoming there also world number one. But the financial return has yet to be demonstrated, according to analysts. The development of the podcast has also brought him controversy, notably with American star Joe Rogan accused of spreading misinformation on his shows.

The platform, which mixes a subscription model and a free model using advertising, had a total of 456 million users at the end of September, including 195 million paying subscribers.

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It planned to reach 479 million monthly active users by the end of 2022, including 202 million paid subscribers. The group is aiming for one billion users by 2030.

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Its annual turnover had reached 9.6 billion euros in 2021 – most of it thanks to paying subscribers – while the number of employees had tripled in five years to reach 9,800 at the end of September.

The Swedish group’s announcement follows a series of redundancy plans at the global net giants in recent weeks, even though its workforce is much smaller. After layoffs at Amazon, Meta and Microsoft, Google in turn announced 12,000 job cuts worldwide on Saturday, or just over 6% of its workforce. Microsoft had announced on Wednesday 10,000 layoffs by the end of March.