Music streaming service, Spotify, is the newest tech company to announce a series of cuts. It was reported to be due to excessive expansion during the last Covid-19 pandemic. There will be 600 jobs that will be affected by this decision, after understanding that there was a too rapid expansion.
Daniel Ek, the company’s co-founder and CEO, addressed the staff via a blog post. There, it was stated that the platform would reduce its workforce by 6% after being “too ambitious”. The company’s operating expenses grew at twice the rate of its revenues last year.
“Like many other leaders, I expected to sustain strong tailwinds from the pandemic and believed that our broad global business and the lower risk of the impact of a slowdown in announcements would insulate us,” commented Erik. “In retrospect, I went too far in investing ahead of our revenue growth,” the CEO finished off.
Spotify’s goal is to recover revenues
The Stockholm-based company has been investing heavily in its podcast business. The company’s main revenue comes from its premium service, which represents 85% of the money it earns, the rest coming from the advertising service. Ek confirmed that “over the last few months we have made a considerable effort to control costs, but it simply has not been enough.”
In the last few years, several companies have announced significant job cuts. These include Microsoft, Amazon, Meta, as Facebook’s parent company, Google owner Alphabet, and enterprise software company Salesforce. All have cited an uncertain economic environment and excessive expansion under Covid.19 restrictions. There was also a boom in demand for technology-related products and services.
Seeking to improve numbers
The company, which currently has some 456 million monthly users, will look to cut costs to match revenues. Last year, Bad Bunny was the artist with the most plays on the platform worldwide. He was then followed by Taylor Swift, Drake, The Weeknd and BTS. Despite the presence of these renowned artists, earnings have not been within the Swedish company’s expectations.
Ek also told his staff that Dawn Ostroff, head of content and advertising, would be leaving despite having more than four years with the company. Ostroff was part of the team that shaped the Spotify podcast business. In addition, I guide you through the backlash surrounding the Joe Rogan show, which interviewed guests who shared conspiracy theories about Covid-19.
The company’s CEO understands that they need to become more efficient. “Looking back, I was overly ambitious with investments that outpaced our revenue growth,” Ek noted, in an email sent to workers. The firm expects to pay between 35 and 45 million euros in severance payments.