Spotify Goes Full-Efficiency With More Layoffs

There is never enough efficiency, apparently

BREAKING NEWS

After two rounds of layoffs, Spotify has decided to reduce their headcount by an additional 17%. The company has had incredible earnings performance in the last few quarters, so why double down on efficiency now? 

WHAT HAPPENED

Spotify will eliminate around 1,500 roles in their steepest wave of layoffs by far. They let 600 team members go in January and an additional 200 in June. Those layoffs were about saving costs and scaling back the streaming company's ill-advised massive bet on podcasting. This current 17% reduction is being described as a 'necessity' by management as Spotify makes a push to expanded and long-term profitability. 

LEAN ECONOMICS

Spotify just barely eked out a ~$70 million profit in Q3 this year and these layoffs are all about maintaining those margins. The stream king needs to keep profitability up while they grow revenue on improved user numbers and higher subscription costs. These layoffs are a huge bet on a leaner, more efficient future for big tech as we move into the potential for a bull run in 2024. 

WHY IT MATTERS

It doesn't matter that most of the market is counting on an extended rally as we continue to beat inflation, higher rates are still going to be slowing growth for a long time here and Spotify clearly would rather be a little late to growing into a rally than mistiming the macro picture and dipping back below profitability as things really start to slow in Q1. 2023 really has been the year of efficiency and big tech players simply can't help but get as many cost-savings in as possible. Spotify stock surged over 6% in early trading on the news.