Spotify lays off 600 people, like other tech giants

The world’s number one audio platform, Spotify, announced yesterday Monday that it was laying off 6% of its workforce. 600 positions are affected in what looks like the largest layoff plan in the history of a Swedish startup, which requires 500 million users (456 million users in total, including 195 million paid subscribers).

After job cuts at Google, Microsoft or even Meta, this new announcement indicates that European tech is also affected by the phenomenon.

Founded in 2006, the Swedish company’s boss, Daniel Ek, mentions a “culture change” after prioritizing growth over profits for years. “Looking back, I was too ambitious, investing faster than our turnover grew,” he says.

Cutting costs wasn’t enough

“In recent months, we have made significant efforts to reduce our costs, but this has not been enough,” he said. “This would be unsustainable in the long run in any context, but in difficult macroeconomic conditions it will be even more difficult to close the hole.”

While Spotify has been temporarily profitable, the company has been chronically losing despite very strong growth in its free and paying user base, to the point of competing with Gafam services like Apple Music or Amazon Music.

Spotify has invested over a billion euros in podcasts in recent years and has become number one in the world. But the payback of this activity is still expected.

The golden years are over

The group is aiming for 1 billion users by 2030. Its annual turnover reached 9.6 billion euros in 2021, mainly due to paying subscribers, and the number of employees has tripled in five years and reached 9,800 at the end of September.

The Swedish group’s announcement follows a series of layoff plans at the global networking giants in recent weeks, though its staff is much smaller. Following layoffs at Amazon, Meta and Microsoft, Google in turn announced it was cutting 12,000 jobs worldwide on Saturday, or just over 6% of its workforce. On Wednesday, Microsoft announced that it would lay off 10,000 people by the end of March.

After good years due to the growth of remote work and therefore digital communication tools, the entire technology sector is under the influence of a more uncertain economic context. GAFAM clients are indeed more cautious, with Gartner predicting IT investment growth of 2.4%. What limits the cost of advertising and cloud services.

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