Spotify announced on December 4 that it will be cutting 17% of its workforce, firing at least 1,500 people in the process. This is the third round of cuts for the music streaming service.
Spotify also showed a profitable quarter for the first time since 2021. Its Chief Executive Officer Daniel Ek said the company had expanded its workforce in 2020 and 2021 thanks to low-cost capital but is now facing challenges such as high capital costs and slower economic growth.
The cuts seem to be a big surprise in the face of the company reporting a $70.7 million profit for the third quarter. Spotify cut 6% of its workforce or 600 people at the start of the year. It then retrenched 2% of its employees or 200 people in June.
Ek said that although the company had been more productive in 2023 it was less efficient and it needs to be both.
Not Only Spotify
Tech companies have been slashing jobs throughout the year, with more than 250,000 people losing jobs worldwide in 2023.
Head of rights and royalties at software development company Vistex Phil Bird says that Spotify’s high cost to license music is what is causing its financial strain.
“The cost of doing business is huge for streaming companies,” says Bird.
Spotify currently has 226 million subscribers and 574 million monthly users. Spotify, Apple Music and Amazon Music all charge $10.99 per month for premium subscriptions with access to 100 million songs but Apple and Amazon have other revenue streams. Spotify does not.
Simon Dyson, senior principal analyst of music and digital audio at consultancy firm Omdia says “To have access to every single piece of music that’s ever been released—and ever will be released—for $10 a month is just astounding.”
Basically Spotify is good for people who want to listen to good music but not so great for musicians and artists.
Cover Photo: Wikipedia