[ad_1]
Spotify said Monday it will cut nearly a fifth of its workforce, its third round so far this year, as it continues to spend aggressively to expand beyond music streaming into areas like podcasting and become profitable. struggling to.
Spotify’s chief executive, Daniel Ek, wrote in a note to employees posted on the company’s website that the platform now needs to be “right-sized” for a “very different environment.” Spotify, which is based in Stockholm, will let go about 1,500 people, or 17 percent of its staff.
“Economic growth has slowed dramatically and capital has become more expensive,” Mr Ek said. “Despite our efforts to reduce costs last year, our cost structure is still far from where we need to be.”
Despite being the largest music streaming platform, Spotify has long struggled to be profitable due to the terms of licensing deals with record labels and music publishers. The company has moved into new areas such as podcasting, including purchasing podcast studios Gimlet for $230 million in 2019 and The Ringer for approximately $200 million in 2020. It struck expensive deals with celebrities like former President Barack Obama and Michelle Obama. Also Prince Harry and his wife Meghan. Recently, the company has expanded into audiobooks.
The changes have helped Spotify attract listeners and subscribers, but have not resulted in any financial success. In the first nine months of 2023, Spotify lost $462 million, more than double its loss over the same period in 2022.
But the company posted a modest profit last quarter, its first in more than a year, which its chief financial officer at the time, Paul Vogel, called “a turning point for the business.”
Spotify had 226 million paying subscribers at the end of September and is on track to add 30 million for the full year, 50 percent more than expected in early 2023. The company recently raised prices for its subscriptions in more than 50 countries.
Spotify also has over 360 million monthly active users whose accounts are supported by advertising. This segment is growing faster than paid subscriptions, but it generates less revenue at lower profit margins for the company.
The cuts are the biggest in jobs announced by Spotify this year. In June, Spotify cut nearly 200 jobs, including many in podcasting. Another 600 employees were let go in January.
Spotify’s cuts come as the technology industry struggles this year with interest rates at a decade low that have financed growth, prompting big tech companies like Amazon, Carvana and Salesforce to cut costs and shed jobs. Have been motivated to make cuts.
As part of its severance package for the job cuts announced Monday, Spotify said an average employee will receive about five months’ salary.
Shares of Spotify, which are listed on the New York Stock Exchange, rose in premarket trading, partially reversing the gains the company has made this year and a long decline from a peak in early 2021. The company’s share price has more than doubled this year.
