Spotify cuts jobs in latest round of tech layoffs

LONDON (AP) – Music streaming service Spotify said on Monday it is cutting 6% of its global workforce, or about 600 jobs, becoming yet another tech company forced to rethink its expansion in the pandemic era as the economic outlook worsens.

CEO Daniel Ek announced the restructuring in an employee announcement that was also posted online.

As part of a management reshuffle, “and to bring our costs in line with requirements, we have made the difficult but necessary decision to reduce headcount,” Ek wrote.

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Major tech companies such as Amazon, Microsoft and Google have announced tens of thousands of job cuts this month as the industry’s booming economy during the COVID-19 pandemic subsided.

Stockholm-based Spotify has benefited from pandemic restrictions because more people have been looking for entertainment while stuck at home. Ek pointed out that the company’s long growth-oriented business model needs to evolve.

The company’s operating expenses doubled last year compared to earnings growth, a gap that would be “unsustainable in the long term” in any economic climate, but even harder to close in a “challenging macro environment,” he said.

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Spotify has made “significant efforts” to cut costs over the past few months, “but it’s just not enough,” he said.

“I was hoping to ride out the strong tailwinds from the pandemic and believed that our broad global business and lower exposure risk from the ad slowdown would protect us. Looking back, I realized that I was too ambitious, investing ahead of our revenue growth,” Ek said. said.

He said that is why the company is cutting its global workforce by about 6%. Ek did not name the actual number of jobs lost, but a company spokesman said the number is 600, based on 9,808 employees listed in its latest quarterly report.

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“I take full responsibility for the actions that brought us here today,” Ek said.

Analysts say that after years of explosive growth, tech companies are being forced to cut jobs in preparation for an economic downturn that is likely to reduce demand for their software, products and services and slash digital advertising spending.

Just last week, Google announced it was cutting 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.

Even with all the recent layoffs, most tech companies are still significantly larger than they were three years ago. According to that year’s annual report, Spotify had 4,405 employees in 2019 before the pandemic.

Shares of Spotify added 3.5% to $101.32 in morning trading.