Spotify continued layoffs – Kommersant FM

Spotify shares jumped after the decision to fire 1.5 thousand employees. As of December 4, the company’s securities rose by 7%. Before this, a letter from the service’s general director, Daniel Ek, appeared on the Internet. Addressing employees, he explained that Spotify invested too much in 2020 and 2021, so now the company needs to adjust expenses. This, he said, is the reason for the decision to fire 17% of the staff.

The company should have addressed costs long ago, agrees Finam FG analyst Leonid Delitsyn: “Service, like any innovative company, would always like to be in a state of rapid growth. In this regard, we can recall that Spotify went public not through the traditional IPO procedure, but through Direct Listing, that is, it simply began to sell its shares. It was still a novelty back then.

Thanks to the wide popularity of the company, the procedure went well. But we must pay attention to the fact that Spotify only broke even in 2021. We are not talking about any high profits; in general, he was barely making ends meet at that time. In 2020, 2022 and 2023, the company suffered losses, and investors’ nerves, of course, are not of iron. In this regard, analyst ratings were unimportant.

But news that the company was getting serious about costs boosted the stock market. Its head noted that he would like to postpone layoffs until 2024-2025, but, alas, expense items must be cut immediately; a signal should be given to the market that the company is becoming mature and is monitoring its budget.

At the same time, there may be negative consequences for Spotify, because all employees will now be on guard, and, perhaps, will not work so selflessly, trying to insure their risks.”

This isn’t the first wave of cuts at Spotify this year. The company laid off about 600 employees in January, and another 200 lost their jobs over the summer. After this, the service reported a profit for the third quarter of about $70 million. Spotify attributed this result to a decrease in marketing and personnel costs.

And yet, another decision to lay off employees may indicate problems in the company, noted Denis Kuskov, CEO of the analytical agency TelecomDaily: “This is not surprising. On the one hand, staff reduction could lead to an increase in the value of the company, because, in fact, this is aimed specifically at improving financial reporting.

On the other hand, such a step does not mean that it will have any long-term effect. The question is the correct use of various directions; only then will it be possible to talk about some kind of systematic positive development.

Many companies miscalculate future development, and this doesn’t only apply to Spotify. This happened at both Microsoft and Google. Employees were recruited for some projects – artificial intelligence, VR – and then they were simply abandoned, and the staff was laid off. But during this period it would be possible to develop something that would really work in the future.”

Earlier, Citi analysts downgraded Spotify shares from “buy” to “neutral” status. They doubted the service’s ability to actively attract an audience and at the same time receive more money from each user.

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Ilya Sizov