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Just days after people happily posted their Spotify Wrapped, bad news has arrived for the music streaming giant. Spotify announced today that it would cut 17 percent of its workforce, a portion that is equivalent to an estimated 1,500 people. It’s the third time the world’s largest music streaming service has cut jobs this year.
The news came after Spotify published its first profitable quarter from 2021. In a note to staff, CEO Daniel Ek said the company had significantly expanded its workforce and offerings throughout 2020 and 2021 thanks to lower cost capital, but is now facing the same problems that startups face in all industries, such as high capital. costs and slower economic growth.
Ek said the cuts may seem “surprisingly large given the recent positive earnings report and our performance,” but due to “the gap between our financial target and our current operating costs,” Spotify would take “substantial action.”
Despite its popularity (Spotify celebrated 30 per cent of the music streaming market by the end of 2022), the company has long struggled to make consistent profits. Layoffs close a bad year: Spotify cuts 6 percent of his staff last January, followed by another 2 percent in June as it scaled back its podcasting business. Even as the world’s most recognized music streaming service, Spotify is plagued by an unreliable business model, in which record companies sit back and collect royalty payments while artists struggle to make ends meet. bring enough cash.
“Investors are increasingly impatient in 2023 for tech companies to start making money,” says Phil Bird, head of royalty rights at software development company Vistex. Spotify is not alone: Tech companies have cut jobs throughout the year, and more than 250,000 people will lose their jobs worldwide in 2023, according to layoffs.for your informationa site that tracks tech job cuts.
Many major tech companies that overhired during the pandemic have taken steps to downsize, and that’s what Ek says Spotify is doing now, too. But Spotify’s high cost of licensing music adds to its financial strain. “The cost of doing business is huge for streaming companies,” says Bird.
Spotify gained momentum in the third quarter of 2023, earning €32 million ($34.6 million) in operating income. It now has 226 million subscribers and 574 million monthly users. “At first glance, it looks great,” says Simon Dyson, senior principal analyst for music and digital audio at consultancy Omdia. “It’s (those) annoying costs that you can’t overcome.”
