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Music streaming giant Spotify has announced it would cut 6% of its workforce, with a total of around 600 employees leaving the company.
Spotify’s move is the latest in a string of mass layoffs at major tech companies, with Microsoft, Amazon, Facebook parent company Meta and Google parent company Alphabet all recently announcing job cuts in response to the current economic downturn. Tech companies were more likely to look for new people as pandemic-fuelled spending increased the need for consumer goods and services.
But Spotify isn’t the only entertainment streaming service making headcount cuts – Netflix cut 2% of its workforce back in May last year as part of a larger cost-cutting effort that saw it cancel a number of projects in development, many of them in the company’s animation division.
Spotify had previously cut its own content in an effort to cut costs. In October 2022, the company axed 11 original podcasts, most of them from the Gimlet and Parcast studios the company acquired as part of its aggressive push into the podcasting industry. Spotify had spent billions of dollars building its podcast presence, losing $200 million alone on its contract with Joe Rogan, the platform’s biggest crowd pleaser.
How Spotify’s woes will affect future prices is unclear, but subscription costs for the best music streaming services generally rising, with Apple Music increasing the price of an individual subscription from $9.99/£9.99 to $10.99/£10.99 per month (and $4.99/£4.99) in October 2022 .99 to $5.99 / £5.99 for a student subscription), followed by similar announced price increases for Amazon Music Unlimited.
CEO Daniel Ek, in announcing the company’s layoff, noted that “by 2022, Spotify’s operating expense growth was two times faster than our revenue growth”, and that the situation was “unsustainable in the long run in any climate “. Spotify is clearly in trouble and Ek’s statements seem to indicate that costs for the service, which has maintained a stable $9.99/£9.99 individual pricing plan since its inception, will soon rise as the company struggles to cope with rising costs and falling revenues.
As reported by VarietySpotify’s CEO had previously said in an October 2022 earnings call that a price increase is “one of the things we’d like to do and it’s something we’ll do [discuss] with ourpartners.”
Analysis: A more expensive Spotify will be a hard sell
Streaming prices are going up for all sorts of services, and a price hike for Spotify is something that could easily be swallowed up by long-standing and dependent music listeners. After all, Apple Music and Amazon Music Unlimited are both now more expensive, and the cost of everything from eggs to plane tickets is going up.
Right?
Not so fast. Compared to Apple Music and Amazon Music Unlimited, Spotify was already poor value. For their $10.99 / £10.99 per month cost, both Apple Music and Amazon Music Unlimited offer lossless and high-res audio, while Spotify continues to stream using a lossy compression format that reduces sound quality. The company had announced plans for a Spotify Hi-Fi level with high-res lossless audio, but that was in 2021 and we’re still waiting for it. (It’s unclear whether the higher-quality tier would be significantly more expensive than the company’s current Premium offerings.)
Apple Music and Amazon Music Unlimited also both offer tracks and full albums in Spatial Audio – essentially Dolby Atmos for music – and so does Tidal, another music service that provides lossless streams, and does so for $9.99 / £9 .99 per month. Spatial audio, which can be experienced through headphones or a full home theater speaker system, continues to impress us with its sound quality and is one of the more exciting developments to come in music listening in decades.
Costs for both Apple Music and Amazon Music Unlimited can also be reduced by purchasing from one of those companies’ larger bundled subscription services. Apple is offering its Apple One bundle, which includes Apple Music, Apple TV Plus, Apple Arcade and 50GB of iCloud Plus cloud storage for $16.95/£16.95 for an individual plan and $22.95/£22, 95 per month for a family plan with up to five accounts. If you’re an Apple user, you’re getting a lot for your money there.
Amazon Music Unlimited, meanwhile, is available at a discounted price to Amazon Prime members (currently $8.99 / £8.99, but could rise to $9.99 / £9.99 when the price for the service rises in February ).
When you add it all up, Spotify doesn’t really offer enough to music fans to warrant a potential price increase. It does offer exclusive podcasts and, at least in the US, audiobooks, but most listeners are attracted to the platform for music. We’ll see what happens in the coming weeks or months as the smoke clears from the company’s headcount cuts, but a more expensive Spotify seems inevitable at this point.