Spotify adds to Big Tech job cuts as layoffs hit highest level since 2000

Music streaming company's share price has fallen more than 49% over the past year

Spotify Technology reported a net loss at the end of the third quarter of last year. Bloomberg

Spotify, the Swedish music streaming service listed in the US, is cutting 6 per cent of its workforce, or about 600 employees, as part of efforts to increase efficiencies in a “challenging macro environment”, it said on Monday.

The company was forced to take the “difficult” decision as despite efforts to rein in soaring costs, operational expenditure outpaced its revenue growth by two times in 2022, chief executive Daniel Ek said in a note to employees.

“In hindsight, I was too ambitious in investing ahead of our revenue growth,” he said.

“That would have been unsustainable long-term in any climate, but with a challenging macro environment, it would be even more difficult to close the gap.”

Mr Ek also confirmed that chief content officer Dawn Ostroff will be leaving the company.

The layoffs at the company follow the firing of 38 staff from Spotify's Gimlet Media and Parcast podcast studios in October, Bloomberg reported.

Spotify had about 9,800 employees at the end of its third quarter in 2022. The company reported a net loss of €166 million ($181 million) in the third quarter, compared with a €2 million profit in the same period of 2021, with sales increasing 21 per cent to €3.04 billion.

In its last regulatory filing the company said the loss was due to higher personnel costs after it boosted its global advertisement sales team, as well as from investment and acquisitions, higher advertising costs and currency fluctuations.

“Many of our new products and improvements to our platform require large investments and involve substantial time and risks to develop and launch,” the company said in its third-quarter regulatory filing.

“Some of these products may not be well received or may take a long time for users to adopt.”

Spotify's share price is up about 20 per cent since the start of this year, but down more than 49 per cent over the past year, and trading at $97.91.

The company operates in 183 countries and territories, with 456 million monthly active users at the end of September.

Spotify's layoffs mirror those of other companies in the technology sector, including Meta, Amazon, Microsoft and Google's parent Alphabet that have cut thousands of jobs after boosting hiring at the height of the Covid pandemic, amid rising interest rates and growing fears of a recession in the world's largest economy.

While overall, companies in the US let go of 363,824 jobs in 2022, 13 per cent more than 2021, the technology sector was the leading job-cutting industry last year, according Chicago-based global employment company Challenger, Gray & Christmas.

A total of 97,171 jobs were cut in the technology sector last year, a 649 per cent increase from firings in the industry in 2021 — the highest since the so-called dot-com crash that started in 2000, according to a survey by the company.

Last week, Microsoft said it is laying off 10,000 of its 221,000 employees to adjust to changing macroeconomics and to cut overall costs at the technology company.

Earlier this month, the world’s biggest e-commerce company, Amazon, said it is laying off more than 18,000 workers, about 6 per cent of its workforce, amid concerns about the US economy and fears of a global slowdown mount.

Output in the US, the world's biggest economy, is forecast to fall to 0.5 per cent this year — 1.9 percentage points below previous forecasts and the weakest performance outside of official recessions since 1970, according to World Bank estimates.

Twitter's full-time headcount has reportedly been reduced to about 1,300 active employees, including less than 550 full-time engineers, compared with about 7,500 positions prior to the company being acquired by Elon Musk last year, CNBC reported, citing internal company records.

In November, Meta founder Mark Zuckerberg announced the company would layoff 11,000 staff, or 13 per cent of the total workforce, amid declining revenue.

Earlier this month in an interview with the US news channel CBS, the International Monetary Fund's managing director Kristalina Georgieva warned that a third of the world's economies may slide into a recession in 2023.

The global economy faces “a tough year, tougher than the year we leave behind”, she said.

“Why? Because the three big economies — US, EU, China — are all slowing down simultaneously.”

In October, the IMF cut its global economic growth forecast to 2.7 per cent this year, 0.2 percentage points lower than its July forecast.

It had also warned of a 25 per cent probability that output could fall below 2 per cent in 2023, the weakest growth profile since 2001 except for the 2008 global financial crisis and the acute phase of the Covid-19 pandemic.

The fund will release an update to its global economic outlook next week.