• Friday, February 23, 2024
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Spotify plans to cut 1,500 jobs in latest round of layoffs

Spotify

Music streaming company Spotify announced on Monday that it would be cutting about 17 percent of its workforce—about 1,500 workers—in an effort to save costs in the face of “dramatically” slower economic growth.

The announcement follows a 26 percent increase in active users to 574 million during the third quarter, which led to an unusual quarterly net profit of €65 million in October as opposed to a loss of €166 million during the same period last year.

According to Spotify, about 1,500 employees will leave the company.

After a spike during the COVID pandemic lockdowns, the tech sector announced a series of layoffs that resulted in the loss of tens of thousands of jobs.

CEO Daniel Ek sent a letter to staff that was seen by AFP, stating, “I realised that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance.”

Read also:Spotify sees 284% surge in local music consumption in 2023

In 2020 and 2021, he highlighted that the Swedish company “took advantage of the opportunity presented by lower-cost capital and invested significantly in team expansion, content enhancement, marketing, and new verticals.

However, he emphasised the shift in the current scenario, citing a “dramatic slowdown in economic growth” and the increased cost of capital.

Ek stated that Spotify, listed on the New York Stock Exchange, had been “more productive but less efficient” during 2022 and 2023, stressing the importance of balancing both qualities.

The company’s growth strategy since its establishment in 2006 has included substantial investments in market expansion and exclusive content, particularly podcasts, amassing over $1 billion in podcast investments alone.

The company’s workforce grew from about 3,000 employees in 2017 to nearly 9,800 by the end of 2022.

The recent announcement on Monday marks Spotify’s third round of layoffs this year, following earlier reductions of 600 jobs in January and 200 in the podcast division in June.

Ek explained in his letter, “We discussed making smaller reductions throughout 2024 and 2025.”

Read also:70% of Spotify’s revenue goes back to music rights holders; Gustav Gyllenhammar

“Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives.”

Looking beyond Spotify, BT, a British telecom giant, disclosed intentions to trim up to 55,000 jobs by the decade’s end, as announced in May.

Similarly, major tech entities like Microsoft and Meta have also revealed plans to reduce their workforce by up to 10,000 employees this year.

Notably, Amazon announced over 18,000 job cuts worldwide in January, while Alphabet, Google’s parent company, also revealed its plans for workforce reductions.