Spotify has become the latest tech giant to announce major layoffs with the streaming giant’s CEO Daniel Ek announcing that around 1,500 staff are being cut due to its growth slowing ‘dramatically’ following years of heavy investment in podcasting.
The Swedish company currently has a staff of around 9,000 with Ek saying in a memo that cuts will ‘rightsize our costs’ while conceding that it would be ‘incredibly painful for our team.’
‘I recognize this will impact a number of individuals who have made valuable contributions. To be blunt, many smart, talented and hard-working people will be departing us,’ Ek said.
In October, Microsoft laid off nearly 700 people from its social media site LinkedIn, bringing the total layoffs this year to nearly 11,000 for the company.
Since August 2022, there have been mass layoffs at Twitter, where 7,500 jobs were shed as part of Elon Musk’s takeover, another 11,000 people were axed at Facebook while Google let go 12,000 people and Amazon meanwhile served notice to around 18,000 workers. Around 225,000 tech jobs were lost in total in 2023 so far.
Last January, Spotify cut around six percent of its workforce, Monday’s announcement dwarfs that. Ek said the company hired more in 2020 and 2021 due to the lower cost of capital and while its output has increased, much of it was linked to having more resources.
Spotify CEO Daniel Ek, shown here, said that he understood that the cuts would be ‘incredibly painful’ for the company
This follows the company axing six percent of its workforce earlier this year
According to the Financial Times, Spotify execs have been trying to cut costs since the company’s ‘expensive push into podcasting’ which ‘tried investors’ patience.’
In July, Harry and Meghan announced that they had parted away from Spotify after they signed a $20 million exclusive podcast deal in 2020.
The ending of the deal came just a year after the debut of Markle’s show, Archetypes, which boasted Serena Williams as its first guest.
It topped Spotify charts in seven countries, including the U.S. and the U.K., and it won the top podcast award at the People’s Choice awards last year.
‘I loved digging my hands into the process, sitting up late at night in bed, working on the writing and creative. And I loved digging deep into meaningful conversation with my diverse and inspiring guests, laughing and learning with them, and with each of you listening,’ Meghan, the Duchess of Sussex, said at the time.
The show also had as guests Mariah Carey, Trevor Noah, Mindy Kaling and Paris Hilton.
In January, Spotify said that it would be combining podcast networks Parcast and Gimlet into its Spotify Studios operation
Other major investments saw the company buy podcasts such as The Joe Rogan Experience, which created controversy as many artists, including Neil Young, demanded their music be removed from the platform over allegations that Rogan spread Covid-19 misinformation.
In the third quarter the company swung to a profit, aided by price hikes in its streaming services and growth in subscribers in all regions, and the company forecast that its number of monthly listeners would reach 601 million in the holiday quarter.
On Monday, he said a reduction of this size will feel large given the recent positive earnings report and its performance.
‘By most metrics, we were more productive but less efficient. We need to be both,’ Ek said.
‘I realize that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance.. We debated making smaller reductions throughout 2024 and 2025,’ Ek said.
‘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.’
According to Business Insider, artists make around $.003 and $.005 per stream, though Spotify itself does not pay per stream.
Instead, they pay per ‘streamshare,’ a figure that is determined by adding up how many times music owned or controlled by a particular rights holder is streamed, divided by the total number of streams in the market it is streamed in each month.
Last month, Spotify announced a new policy regarding royalty payments, eliminating payment for songs with less than 1,000 annual streams starting in 2024.
This news comes as many Spotify users enjoy their Spotify Wrapped annual breakdown of what they listened to over the last year.
In a message to fans who streamed him regularly, comedian Weird Al Yankovic joked: ‘It’s my understanding that I had over 80 million streams on Spotify this year. So, if I’m doing the math right that means I earned $12.’
Experts believe that the company is attempting to recoup losses made from an expensive foray into podcasting which saw Spotify ink a deal with Joe Rogan as well as Harry and Meghan
‘We will continue to invest in our business and hire in key growth areas in the year ahead.’
Microsoft executives previously announced in July that it was laying off less than 1% of its workforce and significantly slow hiring, as its revenue fell short of investor expectations.
The company recorded only $51.9 billion in revenue during the second quarter of the year, but was expected to rake in $52.4 billion.
It had previously recorded blockbuster growth during the COVID pandemic, when consumers and businesses turned to its products as they shifted to a work-from-home model.
Lyft
Ride-hailing firm Lyft said it would lay off 13% of its workforce, or about 683 employees, after it already cut 60 jobs earlier this year and froze hiring in September.
Lyft said in a regulatory filing it would likely incur $27 to $32 million in restructuring charges related to the layoffs.
‘We are not immune to the realities of inflation and a slowing economy,’ Lyft’s founders wrote in the memo to staffers.
The company’s share price has dropped 76% since the start of the year and currently stands at around $10, compared to nearly $45 in January.
Announcing the job cuts in a memo seen by the Wall Street Journal, Lyft founders John Zimmer and Logan Green told staff: ‘There are several challenges playing out across the economy.
‘We’re facing a probable recession sometime in the next year and rideshare insurance costs are going up.
‘We worked hard to bring down costs this summer: we slowed, then froze hiring; cut spending; and paused less-critical initiatives.
‘Still, Lyft has to become leaner, which requires us to part with incredible team members.’
Lyft has around 4,000 employees, not including its drivers.
Spotify
The music streaming service said on January 22 it plans to cut 6% of its workforce, an estimated 588 employees from its 9,800 full time staff.
Spotify said it will incur about $38million in severance-related charges.
The company, whose CEO is Daniel Ek, said its chief content and advertising business officer Dawn Ostroff will also depart.
Apple
Though Apple has not yet announced any major layoffs, CEO Tim Cook told CBS Mornings that it is slowing some hiring as well.
‘What we’re doing as a consequence of being in this period, is we’re being very deliberate in our hiring,’ he said.
‘That means we’re continuing to hire, but not everywhere in the company are we hiring.’
At the same time, though, Cook said ‘we don’t believe you can save your way to prosperity’.
‘We think you invest your way to it,’ he said.