Spotify is cutting 17 percent of its workforce: how it became possible

Streaming platform Spotify will lay off almost a fifth of its employees as it tries to cut costs amid a sharp slowdown in economic growth. Spotify CEO Daniel Ek said in a memo that the company needed to "adjust" costs. Spotify has already reduced staff this year, however, in October 2023, the company reported a profit.

Nederlandse Omroep Stichting writes about this, reports UNN.

Details

On Monday CEO Daniel Ek announced that Spotify will lay off about 17 percent of its global workforce, addressing employees in a a memo to employees.

To align Spotify with our future goals and ensure we are properly prepared for the challenges ahead, I have made the difficult decision to reduce our overall headcount by approximately 17%.

To align Spotify with our future goals and ensure we are properly prepared for the challenges ahead, I have made the difficult decision to reduce our overall headcount by approximately 17%

Given the the total number of 9241 employees revealed during the last earnings report the cuts are expected to affect more than 1,500 people.

Also, Daniel Ek in his in an address to his employees expressed regret over the layoffs, and assured that people who lost their jobs would receive approximately five months' salary and support in finding a new job.

I realize that this will affect many people who have made valuable contributions. Simply put, we will be losing a lot of smart, talented and hardworking people

The company's CEO also recognized also admitted that the massive layoffs came as a surprise to many people, as the many people, as Spotify reported its first quarterly profit since 2021 in October. profit since 2021. But it is noted that this profit is (partially) due to price increases last summer, when the music service's subscription went up by 20 percent. This profit seems to be insufficient to close the gap between financial goals and operating costs.

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Is Spotify really in trouble? in trouble?

If you look back in time to the chronology of the previous time, it turns out that in January 2023, the company also held a wave of group layoffs, reducing employment by 6%, also citing rising costs.

Guillaume Warmerdam, owner of indie music distributors MakeWaves.fm and LAB Music, in a commentary to Dutch broadcaster analyzed Spotify's decision to cut its workforce.

In particular, the expert noted that Spotify not only collects more money from listeners by increasing subscription prices, but more than half of the users still have a free subscription with advertising. In addition, the company takes away the budget from record labels with services like Discovery Mode. Here, songs songs become popular for a fee, and the algorithm recommends new songs to listeners.

According to Wormerdam, Spotify is also cutting money with a new revenue model that is causing quite a stir.

They only want to pay artists if they have not only a thousand streams within a year, but also 50 different listeners. So if you have thousands of streams from just one account, you won't get anything

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