Spotify Tecnology SA is the latest tech giant to announce major layoffs, joining Microsoft, Google, Meta, Amazon and Twitter. The Swedish music company announced last Friday that it will lay off 6% of its workforce later this week, sources close to the situation told Bloomberg.
Spotify reportedly retained roughly 9,800 employees at the end of September, meaning the layoffs are projected affect around 600 workers. No senior Spotify official has yet confirmed the total number to be affected. Daniel Ek, founder of Spotify, announced the news in a memo to his employees:
Over the next several hours, one-on-one conversations will take place with all impacted employees. [...] In hindsight, I was too ambitious in investing ahead of our revenue growth. And for this reason, today, we are reducing our employee base by about 6% across the company.
The measure follows the dismissal of 38 people in October who worked at the podcast studios Gimlet Media and Parcast. In addition, Spotify said it will carry out a major reorganization, a move which saw the resignation of Chief Content and Advertising Officer Dawn Ostroff and the promotion of Gustav Söderström and Alex Norström to the role of co-presidents. All this, reports Reuters, will cost the music streaming giant between €35-45 million ($38-49 million), although it also caused the share price to rise by 3.5%.
Podcasting the root of Spotify's losses
It seems that much of Spotify's crisis is due not only to excessive growth, but also to its commitment to podcasting. As reported by Bloomberg, the company made a massive commitment to the medium in 2019. As a result, it invested more than $1 billion to acquire podcast networks, an online hosting service, authoring software and the rights to such popular podcasts as The Joe Rogan Experience and Armchair Expert.
However, profits are taking longer than expected to roll in, which set off alarm bells for investors. As a result, the share price fell 66% during 2022 amidst continued shareholder concern. Executives assured in June 2022 that the return on this investment could take between one and two years to arrive.
