Spotify has announced plans to cut 6 per cent of its workforce, amounting to roughly 400 employees.
Spotify CEO Daniel Ek announced the restructuring in a message to employees that was also posted online. He wrote that the cuts were part of a revamp that involved a management reshuffle.
“To bring our costs more in line, we’ve made the difficult but necessary decision to reduce our number of employees,” Mr Ek wrote.
Spotify had benefited from pandemic lockdowns because more people had sought out entertainment when they were stuck at home. Mr Ek indicated that the company’s business model, which had long focused on growth, had to evolve.
The company’s operating costs last year grew at double its revenue growth, a gap that would be “unsustainable long-term” in any economic climate, but even more difficult to close with “a challenging macro environment,” he said.
Spotify made “considerable effort” to rein in the costs over the past few months, “but it simply hasn’t been enough,” he said.
“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,” Mr Ek said.
“I take full accountability for the moves that got us here today.”
After years of heady growth, analysts say tech companies are being forced to cut jobs in preparation for an economic downturn that’s likely to cut demand for their software, products and services and reduce digital ad spending.
Just last week, Google announced it was slashing 12,000 jobs while Microsoft said it would cull 10,000 workers, bringing to at least 48,000 the number of cuts that Big Tech companies announced in January alone.
In early trading, shares of Spotify rose by 4.2 per cent on Monday.
There have been more than 100,000 job losses from major tech firms over the last year, according to data gathered by Layoffs.fyi.
Additional reporting from agencies