Spotify announces thousands of job cuts
Music streaming giant Spotify said on Monday it would reduce its number of employees by around 17 percent in a bid to cut costs amid "dramatically" slower economic growth. The announcement comes on the heels of a rare quarterly net profit of 65 million euros in October, compared to a loss of 166 million for the same period a year earlier, and following 26 percent growth in active users for the third quarter to 574 million. Around 1,500 people will leave the company, Spotify said. It was the latest in a series of layoffs announced in the tech industry which is cutting tens of thousands of jobs following a boom during Covid pandemic lockdowns. "I realise that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance," chief executive Daniel Ek wrote in a letter to employees. He said that in 2020 and 2021, 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." Ek said the company now finds itself in a very different environment, noting that "economic growth has slowed dramatically and capital has become more expensive." "Despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big," he added. Ek said that in 2022 and 2023, Spotify, which is listed on the New York Stock Exchange, was "more productive but less efficient. We need to be both." The company had "too many people dedicated to supporting work and even doing work around the work rather than contributing to opportunities with real impact." Spotify said the layoffs would lead to charges of around 130-145 million euros in the fourth quarter, primarily consisting of severance-related payments. The company also updated its fourth quarter outlook to an operating loss in the range of 93-108 million euros, compared to a previously expected profit of 37 million euros. Spotify did not specify when it expected to see the gains of its job cuts, adding only that they would "generate meaningful operating efficiencies going forward". Tomas Otterbeck, head of equity research at Stockholm-based investment bank Redeye, told Swedish news agency TT he had been expecting the company to make cuts, "but that they were this big surprised me". He said he expected the layoffs to mainly hit the research and development department where the company has more than doubled its costs in recent years. Spotify has invested heavily since its 2006 launch to fuel growth with expansions into new markets and, in later years, exclusive content such as podcasts. It has invested over one billion dollars into podcasts alone. (AFP)