The world’s number one audio platform, Spotify, announced yesterday Monday the removal of 6% of its workforce. 600 positions are affected in what is similar to the largest layoff plan in the history of the Swedish startup which claims 500 million users (456 million users in total, including 195 million paying subscribers).
After the job cuts at Google, Microsoft, or even Meta, this new announcement indicates that European tech is also affected by the phenomenon.
The boss of the Swedish company founded in 2006, Daniel Ek, mentions a “change of culture” after years of prioritizing growth before profits. “In hindsight, I was too ambitious by investing faster than our growth in turnover,” he says.
Reducing costs was not enough
“We have made a considerable effort in recent months to reduce our costs, but it has simply not been enough,” he also mentioned. “That would be unsustainable in the long term in any context, but in a difficult macroeconomic environment it will be even more difficult to plug the hole.”
If Spotify was temporarily profitable, the company is chronically subject to losses, despite very strong growth in its free and paid user base, to the point of competing with Gafam services, such as Apple Music or Amazon Music.
Spotify has invested more than a billion euros in the podcast in recent years, to the point of becoming the world number one. But the ROI of this activity is still awaited.
The golden years are over
The group is aiming for one billion users by 2030. Its annual turnover 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 reach 9,800 at the end of September.
The Swedish group’s announcement follows a series of redundancy plans at the global net giants in recent weeks, even though its workforce is much smaller. After layoffs at Amazon, Meta and Microsoft, Google in turn announced 12,000 job cuts worldwide on Saturday, or just over 6% of its workforce. Microsoft had announced on Wednesday 10,000 layoffs by the end of March.
After good years due to the rise of telework and therefore digital communication tools, the entire tech sector is affected by a more uncertain economic context. GAFAM client companies are indeed more cautious, with growth in IT investments expected to be 2.4%, according to Gartner forecasts. What limit spending on advertising and cloud services.