Music streaming service Spotify has announced that it is laying off 6% of its global workforce, making it the latest major technology company to resort to mass layoffs in response to the deteriorating post-pandemic economic picture.
The Stockholm-based company’s restructure was announced in a message to staff posted online by CEO Daniel Ek. He said that in order to "bring our costs more in line", Spotify has “made the difficult but necessary choice to cut our number of staff." The reshuffle will also involve a management restructure, according to Ek.
Last week Google parent company Alphabet said that it will cut around 12,000 redundancies.
But what does this latest round of cuts mean for Spotify’s employees in the UK, and why are so many tech companies saying goodbye to large swathes of their workforces? Here is everything you need to know.
Why is Spotify making job cuts?
Covid-19 sparked an economic boom for many large companies in the technology sector as consumers - many stuck at home due to pandemic tackling lockdowns - had more time and money on their hands, and were in need of entertainment.
But the crest of that wave is now in the rear-view mirror, and as cost-of-living crises and worldwide rising inflation stretch customers’ pockets, many of them are saying goodbye to tech luxuries - such as cancelling subscriptions to services like Spotify - in an effort to save the pennies.
In his message to staff, Ek said the company’s operating expenses last year were double its revenue groth, a difference that would be "unsustainable long-term" in any economic situation, but one made considerably more difficult by “a challenging macro environment”.
“I hoped to sustain the strong tailwinds from the pandemic and believed that our broad global business and lower risk to the impact of a slowdown in ads would insulate us. In hindsight, I was too ambitious in investing ahead of our revenue growth,” he said. “I take full accountability for the moves that got us here today.”
How will the news affect jobs in the UK?
It’s not yet been made public exactly where the job cuts will come, or how they could affect staff in Spotify’s UK offices in London. The company is reducing its global workforce by around 6%, but it has not been confirmed how many jobs will be lost.
But according to Spotify’s most recent annual report, the company employs around 6,600 employees, which would suggest that 400 worldwide positions will be affected.
Why are so many tech companies announcing job cuts?
The news comes as other international tech companies announced similar mass layoffs, including Microsoft, which said “macroeconomic conditions and changing customer priorities” were to blame for 10,000 jobs - almost 5% of its workforce - being axed.
Microsoft joined a raft of rivals, such as Amazon and Facebook owner Meta, in trimming their workforces on fears of a slowdown in demand as the US and global economy slows.
Satya Nadella, chief executive of Microsoft, said in an online blog to employees that customers that were accelerating their spending on digital technology during the pandemic are now trying to “optimise their digital spend to do more with less”.
“We’re also seeing organisations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one,” he wrote.
Earlier this month, Amazon announced plans to shut three UK warehouses in a move that will impact 1,200 jobs, though a spokesperson for the online retail giant said all workers at the affected sites will be offered roles at other existing Amazon locations.
The closure plans came just over a week after Amazon said it is cutting more than 18,000 jobs worldwide in the largest layoffs programme in its history, citing an in-depth review of its business and the pressure of dampening demand and recession fears.