The dominant music streaming platform Spotify is trying harder these days.

When I say trying harder, I mean trying harder to become profitable because after almost a generation of when burning cash was ok, investors suddenly demand a business that doesn’t run a minus every year.

Zero rates have had an oversized effect on the balance of business in 2023 and 2024.

Failure isn’t rewarded with gaudy executive compensation and more vested shares.

Belt tightening by cutting staff and streamlining operations is the paradigm we are finding ourselves in.

Spotify was the prototypical loss maker in tech that was given a pass because it grew users fast.

Now that interest rates are high, tech companies are penalized by going to the debt markets too much and the effect is magnified if a company needs a high amount of debt.

Logically, SPOT has made diversifying revenue a top bullet point in their strategic future and that is exactly what they are doing.

SPOT has also discovered it can generate additional money from the most diehard music fans. Currently, all listeners pay the same rate for access to a musician’s catalog. But there are fans willing to pay far more to support an artist they love, as evidenced by the rising price of concert tickets, merchandise, and even vinyl for Korean artists.

SPOT plans to raise the price of its popular audio service in several key markets for the second time in a year, a crucial step toward reaching long-term profitability.

The streaming giant will increase prices by about $1 to $2 a month in five markets by the end of April, including the UK, Australia, and Pakistan, according to people familiar with the matter.

It will raise prices in the US, its largest territory, later this year, said the people, who asked not to be identified discussing confidential plans.

The higher prices will help cover the cost of audiobooks, a popular service introduced late last year.

Spotify offers customers up to 15 hours of audiobook listening a month as part of their paid plan. While the company pays publishers for books, it has so far only collected additional revenue from listeners who exceed the limit.

Spotify paid record labels, artists, and others more than $9 billion last year – from $13.2 billion in revenue.

Last year, SPOT posted its best year of user growth ever, with 113 million new sign-ups to its free and paid services.

Spotify had 602 million users at the end of 2023, including 236 million paying customers.

The success of the price increase has given management confidence to seek even more. Under the new pricing, individual plans will go up by about $1 a month, while family plans and so-called duo plans for couples will rise by $2.

In the last 365 days, the stock has catapulted from $134 to over $300 per share.

The stock is absolutely resonating with investors and moves by management have been aggressive to branch out from the music royalty business.

Buy SPOT on the dip.

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.