Spotify has once again announced noticeable cuts in staff. Around 17 percent of all jobs are to be eliminated. The streaming service even posted a profit in the third quarter.
For the third time in a year, Spotify is throwing employees out the door. The music streaming service is groaning under increased costs and now wants to part ways with more than a thousand employees. Spotify boss Daniel Ek announced in a letter that around 17 percent of the total workforce would have to leave the company.
At the end of 2022, the Stockholm-based company had almost 8,400 employees. Around 1,500 jobs will be affected by the cuts, a spokesman said. In the past few months, a total of around 800 employees had to resign in two waves.
“More productive, but less efficient”
Ek cited slowing economic growth and increased interest rates as the reasons for his decision. He was aware that a cut of this magnitude would seem surprisingly large to many given the recent positive earnings report. Spotify invested “significantly” in 2020 and 2021.
“Now we find ourselves in a completely different environment,” the CEO continued. Despite efforts to reduce costs last year, they remain too high. “By most measures we are more productive but less efficient.”
Spotify is considered the clear number one in music streaming ahead of Apple and Amazon. In order to promote growth through expansion into new markets and exclusive content such as podcasts, the group has also invested a lot of money since its founding. The company spent over a billion dollars on podcasts alone.
Black numbers again in the third quarter
Despite its global success, Spotify has never achieved an annual net profit, and positive quarterly results have so far been the exception. In the third quarter, however, the group made it back into the profit zone after an increase in the number of users and a price increase.
The number of paying users recently rose by 16 percent to 226 million people. From July to September, the Swedish company recorded a profit of 32 million euros. Last year there was a loss of 228 million euros in the same period.
A smaller reduction in personnel in the next two years was also discussed, wrote Ek. “However, given the gap between our financial targets and our current operating costs, I have decided that a comprehensive measure to adjust our costs is the best option to achieve our goals,” said the manager. Employees affected by the workforce reductions should receive severance pay and remaining vacation days should be paid out.
Waves of layoffs throughout the industry
Other large tech companies also cut numerous jobs this year. Rising inflation and the threat of recession are causing problems for the industry. After years of growth, companies are preparing for lean years and are cutting back on staff.
But the end of the road has not yet been reached, explained analyst Dan Ives. “We expect an industry-wide job loss of another five to ten percent. Because many companies have spent money like rock stars of the 1980s.” According to the website Layoffs.fyi, around 420,000 employees in the technology industry have been kicked out in the USA alone since the beginning of 2022.
The online retailer Amazon, for example, cut 27,000 jobs in two waves. This corresponds to around nine percent of the previously around 300,000 employees in administration. Facebook parent Meta cut jobs for the first time since the company was founded in 2004. The company is suffering from collapsing advertising revenue and billions in losses from its “Reality Labs” division. The picture looks similar at Microsoft and Google parent Alphabet.