(RepublicanJournal.org) – Music streaming giant Spotify just made some big staff cuts. The company is the largest music provider in the world, but it isn’t very profitable. Now it looks like many of its employees are paying the price for a dubious business model.
On December 4, Spotify, the Stockholm-based music and podcast service, announced that it’s planning to cut its workforce by 17%. As of September, the company employed 9,241 people, which means around 1,570 jobs lost. CEO Daniel Elk sent a memo to staff explaining the cuts; he told them that, after the company’s “recent positive earnings report” the cuts might seem “surprisingly large,” but claimed they were necessary because of the gap between Spotify’s financial goals and the costs of running it.
These aren’t the first cuts at Spotify. Although the company expanded during the pandemic lockdowns as people splashed out on online entertainment, it’s been relentlessly shrinking since then. In January it cut 6% of its staff. Another 2% went in June. Now management is cutting even deeper.
According to Elk, the main cost Spotify faces is royalty payments. Royalties expert Simon Bird says streaming companies face “huge” expenses because every time someone streams a song, the company needs to send a payment to the artist who released it. Individually those payments are small, but Spotify has over half a billion customers, so there are a lot of payments to be made; it’s estimated the company has paid Taylor Swift alone almost $100 million this year.
Other streaming services, like Apple and Amazon, face the same costs — but they can subsidize them with the profits from their other divisions. Streaming is all Spotify does, so they need to cover all their costs — and make a profit, from subscription fees and ad revenue. Right now, it appears it is struggling to do that.
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