LONDON — Spotify said on Monday that it would cut about 600 jobs or 6% of its global workforce. As the economy gets worse, more and more tech companies have to rethink their growth plans from the time of the pandemic.
CEO Daniel Ek told employees and the public about the change in a message posted online.
As part of the revamp, which includes a management reshuffle, “we’ve made the difficult but necessary decision to reduce our number of employees,” Ek wrote.
This month, big tech companies like Amazon, Microsoft, and Google announced tens of thousands of job cuts as the industry’s economic boom from the COVID-19 pandemic faded.
Spotify Benefited From The Lockdown
Stockholm-based Spotify benefited from pandemic lockdowns because more people sought entertainment while stuck at home. Ek said that the company’s business model, which had been based on growth, needed to change.
Last year, the company’s operating costs increased at twice the rate of revenue growth, a gap that would be “unsustainable long-term” in any economic climate but would be even more difficult to close in “a challenging macro environment,” he said.
Spotify recently made a “considerable effort” to cut costs, but “it simply hasn’t been enough,” he said.
“I hoped to sustain the strong tailwinds from the pandemic and believed that our broad global business and lower risk to the impact of a slowdown in ads would insulate us. “In retrospect, I was overly ambitious in investing ahead of our revenue growth,” Ek admitted.
No Exact Number Of Jobs Lost Published
That is why, he claims, the company is reducing its global workforce by about 6%. Ek did not provide an exact number of job losses, but a company spokesman said it was 600, based on the 9,808 employees listed in the company’s most recent quarterly report.
“I accept full responsibility for the decisions that brought us here today,” Ek said.
Analysts say that after years of fast growth, tech companies are having to cut jobs to get ready for a slowdown in the economy, which will mean less demand for their software, products, and services, as well as less money spent on digital ads.
Google announced 12,000 job cuts just last week, while Microsoft announced 10,000 job cuts, bringing the total number of cuts announced by Big Tech companies in January to at least 48,000.
Despite the recent layoffs, most technology companies are still much larger than they were three years ago. According to the company’s annual report for 2019, Spotify had 4,405 employees before the pandemic began.
Spotify shares rose 3.5% to $101.32 in morning trading.
SOURCE – (AP)
