Simply days after individuals gleefully posted their Spotify Wrapped, unhealthy information got here for the music streaming big. Spotify introduced immediately that it might lower 17 % of its workforce, a piece that equates to an estimated 1,500 individuals. 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 worthwhile quarter since 2021. In a memo to workers, CEO Daniel Ek stated the corporate had expanded its workforce and choices considerably all through 2020 and 2021, because of 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 development.
Ek stated the cuts could seem “surprisingly giant given the latest constructive 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 reputation (Spotify held 30 % of the music streaming market by late 2022), the corporate has lengthy struggled to show constant earnings. The layoffs wrap up a foul 12 months: Spotify lower 6 % of its workforce final January, adopted by one other 2 % in June because it slimmed down its podcasting enterprise. Even because the world’s most recognizable music streaming service, Spotify is suffering from an unreliable enterprise mannequin, one by which file corporations sit again and rake in royalty funds whereas artists can wrestle to herald sufficient money.
“Traders are more and more impatient in 2023 for tech companies to begin creating wealth,” says Phil Hen, head of rights and royalties on the software program growth firm Vistex. Spotify isn’t alone—tech corporations have slashed jobs all year long, with greater than 250,000 individuals dropping jobs worldwide in 2023, in keeping with layoffs.fyi, a website that tracks job cuts in tech.
Many main tech corporations that overhired in the course of the pandemic have taken steps to rightsize—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 corporations,” Hen says.
Spotify gained momentum within the third quarter of 2023, incomes €32 million ($34.6 million) in working earnings. 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 could possibly’t get on high of.”