Spotify is the latest tech giant to announce major layoffs. The streaming giant’s CEO, Daniel Ek, announced that around 1,500 employees will be cut because growth is slowing “dramatically.”
The Swedish company currently employs around 9,000 people. Ek said in a memo that cuts would “adjust our costs” but acknowledged it would be “incredibly painful for our team.”
“I recognize that this will have an impact on a number of individuals who have made valuable contributions.” “Let me be clear: many smart, talented and hard-working people will be leaving us,” Ek said.
In October, Microsoft laid off nearly 700 employees at its social media site LinkedIn, bringing the total number of layoffs for the company this year to nearly 11,000.
Since August 2022, there have been mass layoffs at Twitter, where 7,500 jobs were cut as part of the Elon Musk takeover, another 11,000 employees were laid off at Facebook, Google laid off 12,000 employees and Amazon has now laid off around 18,000 employees. In total, around 225,000 tech jobs have been lost so far in 2023.
Last January, Spotify cut around six percent of its workforce, and Monday’s announcement dwarfs that. Ek said the company hired more employees in 2020 and 2021 due to lower capital costs, and while its production increased, much of that was related to more resources.
Spotify CEO Daniel Ek, pictured here, said he understood the cuts would be “incredibly painful” for the company
This follows the company laying off six percent of its workforce earlier this year
According to the Financial Times, Spotify executives have been trying to cut costs since the company made a “costly foray into podcasting,” which “tested investors’ patience.”
In July, Harry and Meghan announced they had parted ways with Spotify after signing a $20 million exclusive podcast deal in 2020.
In the third quarter, the company reported a profit, helped by price increases on its streaming services and growth in subscribers across all regions, and the company forecast that monthly listeners would reach 601 million in the holiday quarter.
On Monday, he said a reduction of that magnitude would seem large given the company’s recent positive earnings report and performance.
“By most measures we were more productive but less efficient. “We have to be both,” Ek said.
“I recognize that a cut of this magnitude will feel surprisingly large to many given the recent positive earnings report and our performance. We have discussed making smaller cuts in 2024 and 2025,” Ek said.
“However, given the gap between our financial goals and our current operating costs, I concluded that a comprehensive effort to adjust our costs is the best option to achieve our goals.”
According to Business Insider, artists earn around $0.003 to $0.005 per stream, although Spotify itself doesn’t pay per stream.
Instead, they pay per “streamshare,” a number determined by adding the number of times music owned or controlled by a particular rights holder is streamed, divided by the total number of streams in the market in which it is streamed every month.
Last month, Spotify announced a new royalty payment policy that will eliminate payment for songs with fewer than 1,000 annual streams starting in 2024.
This news comes at a time when many Spotify users are enjoying Spotify Wrapped’s annual overview of what they’ve listened to over the past year.
In a message to fans who streamed him regularly, comedian Weird Al Yankovic joked: “As far as I know, I’ve had over 80 million streams on Spotify this year.” So if I’m doing the math correctly, that means I’m making $12 have.”