Fake note for Spotify: the world’s number one audio platform has just announced that it will cut its workforce by “around 17%”, or around 1,500 people, to cut costs in the context of a “spectacular” slowdown in economic growth. In the third quarter, the group achieved a rare operating profit thanks to a 26% increase in the number of its active users and a net profit of 65 million euros.
“I am aware that a cut of this magnitude may seem surprising to many given the recent positive earnings report and our performance,” CEO Daniel Ek wrote in a letter to employees. The layoffs should allow “to align Spotify with our future goals and ensure that we are adequately sized for future challenges,” he explained in that letter.
It is the third wave of job cuts since the Swedish group already announced 600 job cuts in January and 200 in June at its podcast division. This job reduction is part of a wave of layoffs that has affected global technology since the beginning of 2023, especially American giants such as Meta (which reduced the number of employees by almost 25%), Alphabet (which dismissed 12,000 people), Microsoft or Amazon. In 2022 and 2023, Spotify, which is listed on the New York Stock Exchange, was “more productive but less efficient. We have to be both.”
“A cost structure that is too high”
In 2020 and 2021, the company “seized the opportunity offered by lower cost capital and invested significantly in team expansion, content enhancements, marketing and new verticals,” Daniel Ek said. “However, we are in a very different environment today. And despite our efforts to reduce costs last year, our cost structure is still too large to achieve our goals,” he added.
Since its launch, Spotify has continued to invest to fuel its growth by expanding into new markets and then offering exclusive content such as podcasts, in which it has invested more than a billion dollars. In 2017, the company had approximately 3,000 employees, a number that will more than triple to approximately 9,800 people by the end of 2022. Since its inception, the platform has never posted a net profit across the board. year and only occasionally turns quarterly profits, despite its success in the online music market. In the third quarter, Spotify grew its paid subscribers, which account for the majority of its revenue, by 16% to 226 million subscribers.