Simply days after individuals gleefully posted their Spotify Wrapped, dangerous information got here for the music streaming large. Spotify introduced at this time that it could lower 17 percent of its workforce, a bit that equates to an estimated 1,500 people. It’s the third time the world’s largest music streamer has lower jobs this yr.
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, 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 progress.
Ek mentioned the cuts could appear “surprisingly giant given the current constructive earnings report and our efficiency,” however as a result of “the hole between our monetary aim state and our present operational prices,” Spotify would take “substantial motion.”
Regardless of its reputation (Spotify held 30 percent of the music streaming market by late 2022), the corporate has lengthy struggled to show constant earnings. The layoffs wrap up a foul yr: 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 affected by an unreliable enterprise mannequin, one through which report firms sit again and rake in royalty funds whereas artists can wrestle to bring in enough cash.
“Buyers are more and more impatient in 2023 for tech companies to begin getting cash,” says Phil Chook, head of rights and royalties on the software program growth firm Vistex. Spotify isn’t alone—tech firms have slashed jobs all year long, with greater than 250,000 individuals dropping jobs worldwide in 2023, in response to layoffs.fyi, a web site that tracks job cuts in tech.
Many main tech firms that overhired through 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 big for streaming firms,” Chook 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 might probably’t get on high of.”