LONDON >> Music streaming service Spotify announced today that it is shedding 6% of its global workforce, or about 600 jobs, becoming yet another tech company forced to reconsider its expansion in the pandemic era as weaken the economic outlook.
CEO Daniel Ek announced the restructuring in a note to employees, which was also posted online.
As part of the restructuring, which includes a management reshuffle, “and to better align our costs, we have taken the difficult but necessary decision to reduce our headcount,” wrote Ek.
Big tech companies like Amazon, Microsoft and Google announced tens of thousands of job cuts this month as the economic boom the industry experienced during the COVID-19 pandemic tailed off.
Stockholm-based Spotify had benefited from pandemic lockdowns as more people sought entertainment when stuck at home. Ek pointed out that the company’s business model, long focused on growth, needs to evolve.
The company’s operating expenses rose twice as fast as revenue growth last year, a gap that would be “unsustainable in the long term” in any economic climate but is even more difficult to close with “a challenging macro environment,” he said.
Spotify has made “considerable efforts” to contain costs in recent months, “but it just hasn’t been enough,” he said.
“Hoping to sustain the strong tailwinds of the pandemic, I believed that our broad global business and reduced exposure to the impact of an advertising slowdown would isolate us. In hindsight, I was too ambitious to invest ahead of our sales growth,” said Ek.
He said the company will therefore cut its global workforce by about 6%. Ek didn’t give an actual number of job losses, but a company spokesman said it was 600, based on 9,808 employees listed in its latest quarterly report.
“I take full responsibility for the steps that brought us here today,” said Ek.
After years of rapid growth, analysts say tech companies are being forced to cut jobs to prepare for an economic downturn that is likely to reduce demand for their software, products and services, and reduce digital advertising spending.
Just last week, Google announced it would cut 12,000 jobs, while Microsoft said it would lay off 10,000 workers, bringing the number of cuts big tech companies announced in January alone to at least 48,000.
Despite all of the recent layoffs, most tech companies are still significantly larger than they were three years ago. Spotify had 4,405 employees in 2019 before the pandemic began, according to this year’s annual report.
In morning trade, shares of Spotify are up 3.5% to $101.32.
