Spotify joins the layoffs: announced that it will reduce 6% of its global workforce

() — Spotify announced Monday that it will cut 6% of its global workforce to reduce costs, thus joining technology companies such as Amazon and Microsoft in cutting staff in the face of the slowdown in the global economy.

In a letter to employees posted on the company’s website, company CEO Daniel Ek took full responsibility for the downsizing, calling it “difficult but necessary.”

“Like many other leaders, I hoped to sustain the strong tailwinds of the pandemic and believed that our large global business and lower risk of the impact of a slowdown in ads would insulate us. In hindsight, I was overambitious in investing ahead of growth. of our income,” he said.

The Stockholm-based music streaming company had some 9,800 employees worldwide as of September 30.

Shares of the company, whose value has nearly halved in the past 12 months, gained more than 4% in premarket trading in New York. Spotify’s stock price is up 24% since the start of 2023, Refinitiv data shows.

In recent months, major tech companies have quickly reversed a pandemic hiring wave that saw them add thousands of workers to keep up with rising demand from households and businesses for services like online shopping and video conferencing.

The same companies have recently made deep cuts to their workforces as inflation weighs on consumer spending and rising interest rates squeeze financing. Demand for digital services during the pandemic has also declined as people return to their lives offline.

Over the past three months, Amazon, Google, Microsoft and Facebook, the parent company Meta, have announced plans to remove more than 50,000 employees from their collective ranks.

‘Untenable’

The recent cuts in most cases equate to a relatively small percentage of each company’s overall headcount, essentially wiping out the last year of profit for some and leaving them with a huge workforce.

Spotify’s decision to cut about 590 jobs is part of a broader reorganization to improve efficiency and “speed up decision-making,” according to Ek. As part of the changes, product and engineering work will be centralized. Chief Content Officer Dawn Ostroff has also decided to leave the company, Ek said.

Spotify posted a loss of 228 million euros ($248 million) in its last financial quarter through September 30, while operating expenses soared 65%, according to a company presentation to investors.

In 2022, operating expenses grew at double the company’s revenue rate, Ek said.

“That would have been unsustainable in the long term in any climate, but with a challenging macro environment, it would be even more difficult to close the gap,” he told employees in the letter on Monday. “As you know, we’ve made a considerable effort to control costs over the past few months, but it just hasn’t been enough.”

— Clare Duffy contributed to this report.