The music streaming service Spotify (SPOT) is living in the future and by that I mean they are cutting 17% of staff.
Silicon Valley will be a lot leaner in the future and this is just one of many firms that will shed to become more efficient.
The announcement was made today and is making shockwaves through the industry.
Many ponder what might be the catalyst to the next move up in the tech sector.
Well, look no further than Spotify which is delivering the playbook to squeeze out higher earnings at a time when tech earnings are exposed to potential downgrades.
It’s no joke that tech salaries are exorbitant and gutting the froth is the next stage of Silicon Valley.
Elon Musk delivered us a preview when he dumped 80% of Twitter’s staff realizing that most of his staff didn’t meaningfully contribute or justify what they earned.
Spotify is next to take a magnifying glass to its balance sheet as it hopes to appease shareholders as we head into a 2024 interest rate-cutting year.
It’s my guess that CEO Daniel Ek wants to get his show to benefit from that slingshot effect next year for Spotify shares.
In an email sent out to staff, Ek said that Spotify was taking “substantial action to rightsize our costs,” adding that the company took on too many employees over the years 2020 and 2021 when the capital was cheap and tech companies could invest significant sums into team expansion.
The latest round of cuts equates to roughly 1,500 jobs.
It comes after Spotify reported a 65 million euros ($70.7 million) profit in the third quarter, citing lower spending on marketing and personnel.
Spotify raised the prices of its subscription plans earlier this year and has been expanding into podcasts and audiobooks.
Spotify cut 6% of its workforce, or about 600 employees, at the start of the year. Spotify then laid off 2% of staff, equivalent to roughly 200 roles, in June.
This isn’t the first time they have shed staff and won’t be the last.
Europe has barreled straight into an economic recession and the macroeconomic backdrop has given a great reason for Ek to downsize.
With the way generative AI is going, I don’t believe any further staff cuts will be followed by a hiring bump, because AI will get the job done instead of humans.
Around 2021, we blasted through peak tech hiring and we will never see not only that type of volume hiring, but gone are the days of sweet salaries.
It’s a lot cheaper to plug in software and tech firms will continue to downsize even though economic growth waves come and go.
No economic growth wave in the future will prompt a massive uptick in fresh faces.
AI and its advancement of will effectively mean that Spotify will be run by a few people running servers, infrastructure, and algorithms.
Eventually, the entire tech sector will be run by a handful of people and software underpinning their investments and Ek of Spotify will be included in one of the handful in this exclusive group.
Buy SPOT on the dip.
