Spotify celebrated its annual Wrapped marketing campaign with an unique get together at a London superclub in November.
Sam Smith took to the stage and sang their in style hit “Unholy” at Drumsheds, a 15,000-capacity venue in a former Ikea retailer. Headliners additionally included Charli XCX and Chase & Standing as drinks flowed on the bar.
The celebration was attended by workers, celebrities, the media, and followers who had been among the many performers’ high listeners on Spotify. One other Wrapped get together passed off in Houston that night time, headlined by the rapper Gunna.
4 days later, the corporate reduce 1,500 jobs, together with some workers who labored on Wrapped. CEO Daniel Ek despatched workers a blunt memo saying the layoffs and mentioned Spotify’s value construction was nonetheless too bloated.
“Financial development has slowed dramatically and capital has develop into costlier,” Ek wrote. “Spotify just isn’t an exception to those realities.”
Dave Benett/Getty Photos
Like many firms, Spotify over-hired throughout the pandemic. It practically doubled head rely between 2019 and 2022. Then, final yr it reduce 2,300 jobs via the three rounds of layoffs in January, June, and December.
Some workers suppose Spotify is spending an excessive amount of on events and occasions, particularly when the corporate is shedding hundreds of individuals and seeking to reduce extra prices. Enterprise Insider spoke with 14 present and former staff who shared particulars of what they described as poorly timed, extravagant events. They requested to not be recognized discussing delicate issues.
Spotify is within the leisure enterprise, so a sure variety of extravagant occasions are a part of the deal. Nonetheless, these workers mentioned occasion spending has gone too far, given the corporate’s broader efforts at frugality.
“It was stunning to me that they acknowledged they’re on a cost-cutting drive, however then continued spending,” one former staffer informed BI.
Preserve Wrapping
A Spotify spokesperson mentioned the corporate will proceed occasions reminiscent of Wrapped and others together with Stockholm Intro Days and the Finest New Artist Grammy get together.
These are “key to selling artists, partaking listeners, encouraging collaboration amongst workers, and highlighting our companies,” the spokesperson added. “Spotify is a worldwide firm devoted to celebrating creators, fostering a collaborative worker tradition, and recognising group achievements.”
The corporate declined to remark when BI requested how a lot it spends on events and occasions.
Spotifest 2023
Spotifest, a music pageant only for Spotify workers, stands out in workers’ minds for example of lavish spending.
The most recent Spotifest passed off in August 2023. Lots of of workers gathered at The Brooklyn Mirage in New York for the occasion. Laser lights beamed onto attendees’ faces within the outside courtyard because the headliners Diplo and T-Ache carried out on an enormous stage. Elsewhere, acrobats carried out, drag performers danced, and beer was served out of backpack kegs, in keeping with individuals in attendance.
The house was lit up by orange and blue spotlights, with one wall lined by a bar serving drinks, a YouTube video from the occasion reveals. Sights included a barbershop, photograph cubicles, music-listening stations, a sequence of video games, and a short lived tattoo studio that branded workers with Spotify’s emblem.
Issues shrugged off
Two months earlier than Spotifest, the corporate reduce 200 jobs. And earlier within the yr, throughout the first spherical of cuts, Ek informed workers in a memo that the corporate wanted to “management prices” and that it had made a “appreciable effort to rein-in prices.”
Whereas one employee mentioned Spotifest was a great way to spice up worker morale, one other mentioned the occasion was poorly timed as soon as layoffs started.
A former worker who handled budgets tried to lift the problem of the corporate needing to be higher with spending, however mentioned their issues had been shrugged off.
Intro Days
Melanie Stetson Freeman/The Christian Science Monitor by way of Getty Photos
Spotify’s occasions largely fall into two classes. There are events and occasions which might be open to the general public, which primarily perform as model advertising. Then there are employee-only occasions.
“Whether or not it is a group get together, Grammys get together, Christmas get together, branded events, or additional events which might be comparatively underneath the wraps, there is definitely a ton of cash being thrown at events,” one former worker informed BI.
The corporate is headquartered in Stockholm, and it sends many new hires there for “Intro Days” the place they community, hear from audio system, and rise up to hurry on Spotify tradition.
One former worker described it as the corporate “spending tons of cash flying individuals to Sweden to drink the Kool-Help.” The corporate places them up in a lodge for 3 to five days and covers all their meals, a number of individuals who went on the journeys informed BI.
“You actually simply sit in a room and hearken to executives discuss again to again for 3 days after which there is a get together on the finish,” one individual mentioned. “It is simply such a silly waste of cash.”
One other employee mentioned, “I actually questioned government management’s decision-making and the place they spend cash and I believe Intro Days are an excellent instance.”
This individual mentioned it confirmed poor management for Spotify to proceed spending on events and journeys regardless of financial headwinds.
Past music streaming
Noam Galai/Getty Photos
A few of this lavish occasion spending is concentrated on fixing an issue that is loomed over Spotify for years.
The robust economics of the music-streaming enterprise imply that Spotify pays out about 70% of its income to music rights holders, in keeping with an organization weblog from early 2023. As extra music is streamed on the service, these payouts usually enhance at the same charge. In order the corporate grows, bills climb, too. This has been a priority for traders preferring software program enterprise fashions that sometimes make much more cash as gross sales rise.
A method for Spotify to deal with this problem is to broaden past music streaming and embrace different companies with extra scalable economics, reminiscent of podcasts, audiobooks, and live performance tickets.
It has spent greater than $1 billion on podcasts and went on an acquisition spree in 2019 via shopping for three podcast studios totaling $375 million. Spotify says it takes a 50% fee on income from adverts on podcasts.
Spotify additionally began providing audiobooks to premium subscribers in October 2023, and {the catalogue} has since grown to greater than 250,000. Earlier than it was rolled out, Spotify government Gustav Söderström mentioned the corporate anticipated this new enterprise to “have wholesome margins above 40%.”
To mark the launch, Spotify executives together with Ek flew to the corporate’s New York workplace the place Alicia Keys placed on a non-public efficiency for an intimate viewers, two individuals with information of the occasion mentioned. Attendees acquired a photobook and the corporate gave out Spotify-branded merchandise.
A “new modus operandi”
With large rivals reminiscent of Apple and YouTube lurking, Spotify wants these new companies to work out, whereas additionally attempting to maintain traders blissful by tightening its belt.
“We’re constantly fascinated with effectivity,” Ek informed analysts throughout a February earnings name.
“We began doing it in early 2023 and I believe we’re progressively changing into higher quarter by quarter and I believe traders ought to count on a lot the identical for 2024,” he added. “We’re going to constantly take a look at being extra resourceful with the sources we now have. That is simply the brand new modus operandi that we now have.”
Do you’re employed at Spotify? Obtained a tip? Contact the reporter at [email protected] from a nonwork system.
