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‘I was too ambitious’, says Spotify CEO as tech giant cuts 6 percent of workforce

Spotify founder Daniel Ek said he had been 'too ambitious' as the Swedish streaming giant on Monday announced it is cutting six percent of its approximately 10,000 employees.

Published: 23 January 2023 13:34 CET
'I was too ambitious', says Spotify CEO as tech giant cuts 6 percent of workforce
Spotify's headquarters in Stockholm. Photo: Magnus Hjalmarson Neideman/SvD/TT

The company did not specify where the cuts will be made.

“In hindsight, I was too ambitious in investing ahead of our revenue growth. And for this reason, today, we are reducing our employee base by about  six percent across the company,” Spotify chief executive Daniel Ek said on Spotify’s official blog.

“I take full accountability for the moves that got us here today,” Ek added.

The 39-year-old CEO added that over the next several hours “one-on-one conversations will take place with all impacted employees.”

He said HR business partners are working with employees whose immigration status is connected with their employment.

Shares in the Sweden-based company, which is listed on the New York Stock Exchange, rose over 4.5 percent following the announcement in out-of-hours trading.

Spotify has invested heavily since its launch to fuel growth with expansions into new markets and, in later years, exclusive content such as podcasts.

It has invested over a billion dollars into podcasts alone and raised hackles last year as it signed a $100 million multi-year deal with controversial star podcaster Joe Rogan.

The company has never posted a full-year net profit despite its success in the online music market.

In 2017, the company had around 3,000 staff members, more than tripling the figure to around 9,800 at the end on 2022.

It planned to reach 479 million monthly active users by the end of 2022, including 202 million paying subscribers and is targeting one billion users by 2030.

“While I believe this decision is right for Spotify, I understand that with our historic focus on growth, many of you will view this as a shift in our culture,” Ek said.

‘Unsustainable’

To offer perspective, Ek noted that the growth of the company’s operating expenditure had outpaced revenue growth by a factor of two.

“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,” Ek said.

The company’s annual turnover reached 9.6 billion euros ($10.4 billion) in 2021.

Reporting its third quarter earnings in October, Spotify said it had 456 million monthly active users, of which 195 million were paying subscribers – who account for the majority of Spotify’s income.

In recent months, tech giants such as Google parent company Alphabet, Facebook-owner Meta, Amazon and Microsoft have announced tens of thousands of job cuts as the sector faces economic headwinds.

On Friday, Alphabet announced it would cut 12,000 positions, just a day after Microsoft announced a cut of 10,000.

The cuts in the tech sector follow a major hiring spree during the height of the coronavirus pandemic when companies scrambled to meet demand as people went online for work, school and entertainment.

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MONEY

How Sweden’s 2024 spring amendment budget could affect you

The Swedish government announced its spring amendment budget on April 15th. How will it affect people living in Sweden in the coming year?

Published: 15 April 2024 10:51 CEST
How Sweden's 2024 spring amendment budget could affect you

What is the government aiming for with this budget?

The government has said that this budget, negotiated with the support of the Sweden Democrats, is part of its long-term plan to navigate Sweden’s difficult economic situation, which has the following aims:

  • Fight inflation and support households and welfare

The aim here is “to pursue well-balanced fiscal policy to help drive down inflation while more evenly distributing the burden of high prices”, the government explains on its website.

  • Re-institute the “work-first” principle

The work-first principle is essentially the idea that it should be more profitable for an individual to work than to be unemployed.

The government predicts that an additional 40,000 people could become unemployed this year due to the current state of the economy, and plans to address this by providing training and education initiatives to better equip jobseekers, as well as “remedying the labour market’s structural problems” and “reinforcing the motivating factors behind work and self-sufficiency”.

  • Structural reforms for stronger growth

Here, the government plans to “shift the focus back to economic development”, by introducing structural reforms to increase productivity and improve long-term growth.

How will proposals in the spring amendment budget affect us living in Sweden?

Much of the budget is aimed at mitigating any adverse effects of the current state of the Swedish economy, with these proposals aiming to keep the status quo and stop things from getting worse.

For example, one of the largest posts in the new budget is 6 billion kronor to Sweden’s regions, which will go towards compensating for the effects of inflation and avoiding dismissals of healthcare staff. This is in addition to 1.5 billion kronor for increased pharmaceutical costs and a 500 million kronor “extra knowledge grant” in additional regional funding for schools.

There are also proposals designed to help anyone who becomes unemployed over the next year, like a proposal to allocate 167 million kronor to creating more places in adult education, as well as extending the temporarily increased housing allowance for economically disadvantaged families with children at a cost of 650 million. The government has also proposed an allocation of 130 million kronor to Swedish municipalities which will be used to fund summer jobs.

There are also investments designed to strengthen law enforcement and improve the safety and security of people living in Sweden, like an allocation of 260 million kronor to the Tax Agency, customs and the Swedish Enforcement Authority which will be used to “crush” criminal finances, as well as 1.38 billion kronor to fund more prison places, 1.035 billion kronor in funding to improve security and baggage handling in airports and 100 million kronor to the Swedish courts.

Some of the proposals are also aimed at improving Swedish defence, like a 300 million kronor allocation to the Swedish Armed Forces and 385 million kronor for strengthening civil defence.

The government has also announced plans to lower tax on both pensions and income, lower fuel tax, and remove tax on the first 300,000 kronor of savings in ISKs – investment saving accounts.

In terms of budget proposals which will affect immigrants in particular, 25 million kronor has been allocated to attracting international talent, 20 million kronor will go towards funding Swedish courses for Ukrainian refugees, and 138 million will cover costs associated with getting Ukrainians on to Sweden’s population register.

How has the opposition reacted?

The Social Democrats’ economic spokesperson, former Finance Minister Mikael Damberg, called it “a tangled mess of proposals” and an “odd budget”, adding that it was “not a budget for the Swedish people”.

He added that the government should not just be focusing on growing the police force, but also on identifying young people who are at risk of sliding into a life of crime, so that social services can step in at an early stage.

The opposition also criticised the government for not doing enough to support Swedish regions, arguing that six billion kronor is not a sufficient investment to solve the healthcare crisis.

The Social Democrats will present their shadow budget in two weeks.

“We think that families with children are in a much worse position due to this crisis. We think that banks have taken out too much in profits, and that there’s a possibility to work with the power of consumers and use the state bank, SBAB,” Damberg said, adding that his party would like to see a bank tax in the new budget.

The government’s decision to scrap tax on ISK savings has also been criticised by two major authorities: the Financial Management Authority (ESV) and the National Institute of Economic Research (NIER, KI in Swedish). 

NIER said in a response to the proposal that the tax cut benefits represents a large tax cut to people who already have substantial savings, rather than encouraging people to save more.

“If you’re trying to get more people to save, it’s difficult to understand why the government is setting the limit at 300,000 kronor,” the author of NIER’s response to the proposal, Sebastian Escobar-Jansson, told Swedish news agency TT. 

Over half of people with ISK accounts have savings of less than 74,000 kronor.

“More than half of the tax cut benefits those who already have more than 300,000 kronor in an ISK,” ESV added.

In 2024, tax on ISK accounts is 1.086 percent, which is paid whether the account’s investments are making a profit or a loss.

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