The world’s leading audio platform Spotify announced on Monday it would cut 6% of its workforce, or nearly 600 jobs, in the latest in a series of major layoffs at the internet giants to cut costs.
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The layoff plan is the largest in the recent history of the half-billion-user Swedish flagship, a start-up founded in Stockholm in 2006 that has grown into one of the few big European names in tech.
In a message to employees published online, his boss, Daniel Ek, 39, acknowledged “a culture shift” after years of prioritizing growth over profit.
“In hindsight, I was too ambitious to invest faster than our revenue growth,” admitted the Spotify CEO and co-founder.
“For this reason, we are reducing our workforce across the group by around 6 percent,” explains the head of the New York-listed group.
One-on-one meetings with affected employees would take place on Monday, he said. The social plan should cost 35 to 45 million compensation.
At the opening of the New York Stock Exchange, the group’s stock, which has been struggling lately, rose 4.6% to $97.91.
While Spotify was profitable at times, the Stockholm-based group has been continuously making losses for several years, despite a brilliant increase in subscriber numbers and a lead over competitors such as Apple Music and Amazon Music.
In the third quarter, the group, which is due to publish its annual results next Tuesday, increased its net loss to 166 million euros.
“As you know, we have made considerable efforts in recent months to reduce our costs, but it just wasn’t enough,” Daniel Ek explained on Monday.
According to the Scandinavian billionaire, Spotify’s investments have grown twice as fast as its earnings over the past year.
“That would not be sustainable in any context in the long term, but in a difficult macroeconomic environment it will be even more difficult to plug the hole,” he stresses.
Spotify has also invested more than a billion euros in the podcast in recent years and has also become number one worldwide. However, according to analysts, the financial return has yet to be proven.
The podcast’s development has also brought it controversy, most notably with American star Joe Rogan, who has been accused of spreading misinformation on his shows.
The platform, which mixes a subscription model and a free model with advertising, had a total of 456 million users at the end of September, including 195 million paying subscribers.
It planned to reach 479 million monthly active users by the end of 2022, including 202 million paying subscribers. The group aims to have one billion users by 2030.
Annual sales had reached 9.6 billion euros in 2021 – most of it thanks to paying subscribers – while the number of employees had tripled in five years to 9,800 at the end of September.
The Swedish group’s announcement follows a string of layoff plans at the global internet giants in recent weeks, despite its workforce being much smaller.
For its part, Google on Saturday announced 12,000 job cuts globally, or just over 6% of its workforce, following layoffs at Amazon, Meta and Microsoft. Microsoft on Wednesday announced 10,000 layoffs by the end of March.