Simply days after folks gleefully posted their Spotify Wrapped, unhealthy information got here for the music streaming big. Spotify introduced right this moment that it could lower 17 percent of its workforce, a piece that equates to an estimated 1,500 people. It’s the third time the world’s largest music streamer has lower jobs this 12 months.
The information got here after Spotify posted its first profitable quarter since 2021. In a memo to workers, CEO Daniel Ek mentioned the corporate had expanded its workforce and choices considerably all through 2020 and 2021, due to lower-cost capital, however is now bumping up towards the identical issues startups throughout industries are going through, like excessive capital prices and slowed financial progress.
Ek mentioned the cuts could appear “surprisingly massive given the current optimistic earnings report and our efficiency,” however because of “the hole between our monetary purpose state and our present operational prices,” Spotify would take “substantial motion.”
Regardless of its recognition (Spotify held 30 percent of the music streaming market by late 2022), the corporate has lengthy struggled to show constant income. The layoffs wrap up a foul 12 months: Spotify lower 6 percent of its workforce final January, adopted by one other 2 percent in June because it slimmed down its podcasting enterprise. Even because the world’s most recognizable music streaming service, Spotify is stricken by an unreliable enterprise mannequin, one through which file firms sit again and rake in royalty funds whereas artists can battle to bring in enough cash.
“Traders are more and more impatient in 2023 for tech companies to begin making a living,” says Phil Hen, head of rights at royalties at software program improvement firm Vistex. Spotify isn’t alone—tech firms have slashed jobs all year long, with greater than 250,000 folks shedding jobs worldwide in 2023, in response to layoffs.fyi, a website that tracks job cuts in tech.
Many main tech firms that overhired throughout the pandemic have taken steps to right-size—and that’s what Ek says Spotify is doing now. However Spotify’s excessive price to license music provides to its monetary pressure. “The price of doing enterprise is large for streaming firms,” Hen says.
Spotify gained momentum within the third quarter of 2023, incomes €32 million ($34.6 million) in working revenue. It now has 226 million subscribers and 574 million month-to-month customers. “On the floor, it appears to be like nice,” says Simon Dyson, senior principal analyst of music and digital audio at consultancy agency Omdia. “It’s [those] nagging prices that it will probably’t get on prime of.”