Spotify carries out mass layoffs, about 600 employees, and measure interferes with the economy, with the giant's shares rising in the premarket and will cost more than $ 35 million for big tech

Following the same line as other big tech As of the fourth quarter of last year, and with 9.800 full-time employees as of September 30, 2022, Spotify has announced that it will lay off an additional 6% of its contract workforce. That is, the mass dismissal will reach 600 employees. 

The announcement was made today, Monday (23), by Spotify itself. Worldwide, the company has 8,6 employees. Unfortunately, the considerable efforts made to control Spotify's costs have not paid off. That was what is written in the letter signed by Daniel Ek, executive president of the streaming. He acknowledged that he cannot say whether the layoffs will have an effect, and that the move was not taken in the belief that it would be the easy way out.

Also joining the dance will be Dawn Ostroff, Spotify's vice president of content and advertising. The cuts do not only represent savings for the company, but mean a broad organizational reconstruction project. 

This is because, like the other organizations in this market, the expectation is of a recession from the end of this first quarter of 2023. With the announcement of the mass layoff, Spotify shares rose in the premarket to 3,5% per share. 

The measure will initially generate large expenses for Spotify. The mass layoff operation is expected to cost between R$197,5 and R$254 million. In dollars, between US$ 35 and US$ 45 million. This cost is related to the indemnities that the employees will certainly charge. A big tech will pay compensation to employees until June 2023.

Strong drop in demand

The fly that stung Spotify also stung other giants, such as Alphabet and Microsoft. After two years of growth driven by the pandemic, we are hostage to the solutions created by big tech, and large-scale hiring has been replaced by mass layoffs.

Spotify is headquartered on the European continent, in the capital of Sweden, Stockholm, more precisely, and since the end of last year it has seen its revenues in a downward movement, that is, in decline. It's just that advertisers are shrinking ads in every direction they can: quantity, exposure size, whatever. In 2022 alone, the declines were around 50% in shares.

Hiring began to decline since October last year, as did the other big techs. It is the economy once again taking precedence over the needs of humanity. Together, companies in the sector have already laid off more than 60 people, and announce that the cuts will continue.

In making the announcement, Ek acknowledged that Spotify's project was more ambitious than it should have been. Looking back, the chief executive said he invested so much in growing the platform before revenues showed results. He also recognized himself as daring and took full responsibility for the wave that led to big tech to swim and die on the beach.

In the letter, Ek highlights the difficulty of the decision, but they did not see another way, since Spotify's operating expenses, in 2022, were twice as high as revenues. Since last year, hiring was reduced, but layoffs were not expected. See other companies that also performed mass dismissal.

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