Monday, March 4, 2024
31 C
Brunei Town

Spotify cuts 17pc of jobs as economic growth slows

STOCKHOLM (AFP) – Music streaming giant Spotify said Monday it would reduce the number of its employees by around 17 per cent in a bid to cut costs amid “dramatically” slower economic growth.

The announcement comes on the heels of a rare quarterly net profit of EUR65 million in October, compared to a loss of 166 million for the same period a year earlier, following 26 per cent 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 cutting tens of thousands of jobs following a boom during COVID pandemic lockdowns.

The Spotify logo on a smartphone. PHOTO: AFP

“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, which was seen by AFP.

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”.

“However, we now find ourselves 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”.

A leaner structure will “allow us to invest our profits more strategically back into the business”, he said.

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 USD1 billion into podcasts alone.

In 2017, the company had around 3,000 staff members, more than tripling the figure to around 9,800 at the end of 2022.

The company has never posted a full-year net profit and only occasionally quarterly profits despite its success in the online music market.

In the third quarter, Spotify registered a 16 per cent rise in paying subscribers, which make up the bulk of the company’s revenue, to 226 million, despite price hikes.

It said it expected to exceed 600 million active users by the end of the year.

Monday’s lay-off announcement was Spotify’s third this year.

In January, the company announced around 600 job cuts, followed by another 200 in the podcast division in June.

“We debated making smaller reductions throughout 2024 and 2025,” Ek wrote in his letter.

“Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives.”

British telecom group BT said in May that it will axe up to 55,000 jobs by the end of the decade.

spot_img

Latest

spot_img