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Following The Same Line As Other Big Techs Since The Fourth Quarter Of Last Year, And With 9,800 Full-Time Employees Until September 30, 2022, Spotify Announced It Will Lay Off An Additional 6% Of Its Workforce. In Other Words, The Mass Layoff Will Affect 600 Employees.
The announcement was made today, Monday (23), by Spotify itself. Worldwide, the company has 8,600 employees. Unfortunately, the considerable efforts made to control Spotify’s costs have not yielded results. This is what is stated in the letter signed by Daniel Ek, CEO of the streaming platform. He acknowledged that he cannot say whether the layoffs will have an effect, and that the measure was not taken in the belief that it would be the easiest way.
Also joining the layoff will be Dawn Ostroff, Vice President of Content and Advertising at Spotify. The cuts do not only represent savings for the company but rather signify a broad organizational restructuring project.
This is because, like other organizations in this market, the expectation is for a recession starting at the end of this first quarter of 2023. With the announcement of the mass layoffs, Spotify’s stock rose in pre-market trading by 3.5%.
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The measure will initially generate substantial expenses for Spotify. The mass layoff operation is expected to cost between R$ 197.5 million and R$ 254 million. In dollars, between US$ 35 million and US$ 45 million. This cost is related to the severances that employees will certainly claim. The big tech will pay the severances to employees by June 2023.
Significant Drop In Demand
The sting that affected Spotify also affected other giants, like Alphabet and Microsoft. After two years of pandemic-driven growth, we have become hostages to the solutions created by the big techs, and large-scale hiring has been replaced by mass layoffs.
Spotify is headquartered in Europe, specifically in the capital of Sweden, Stockholm, and has seen its revenues on a downward trajectory since the end of last year. Advertisers are reducing ads in every way they can: quantity, size of exposure, and so on. Just in 2022, declines were around 50% in stock prices.
Hiring began to decline since October of last year, just as it did with other big techs. The economy is once again overshadowing human needs. Together, companies in the sector have already laid off more than 60,000 people and announce that cuts will continue.
When making the announcement, Ek acknowledged that Spotify’s project was more ambitious than it should have been. Looking back, the CEO stated that it was too bold to invest so much in the platform’s growth before the revenues showed results. He also took full responsibility for the wave that led the big tech to swim and die on the shore.
In the letter, Ek emphasizes the difficulty of the decision, but they saw no other way, as Spotify’s operating expenses in 2022 were twice its revenues. Since last year, hiring had been reduced, but layoffs were not expected. See other companies that also announced mass layoffs.
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