Author |Punpeng Editor |Fan Zhihui
Recently, Spotify started its third layoff this year, and it is also the largest layoff.
On December 5, Spotify announced on its official website that due to a significant slowdown in economic growth, in order to achieve the company's development goals and meet future challenges, it plans to lay off 1,500 employees, accounting for about 17% of the company's total employees. As early as January this year, Spotify had announced a layoff of 6% of its workforce, or about 600 employees. In June, it announced a 2% layoff of about 200 employees, mainly in the podcast department.
That is to say, as of now, Spotify has laid off about 2,300 employees in 2023.
And the winter of layoffs is not a sudden drop in Spotify. Record giants such as Universal and Warner, as well as platforms such as Tidal and Amazon Music, have all implemented the strategy of "reducing costs and increasing efficiency".
So, after surviving the epidemic, why did the industry collectively accelerate cost reduction and efficiency increase?In 2024, what other directions can be expanded?
On October 27, during UMG's third-quarter earnings conference, the company's chief financial officer, Boyd Muir, publicly presented the upcoming cost savings program.
We will be carefully reviewing our current cost structure and will complete this in the coming months, and will update in due course on our anticipated cost savings plan starting in 2024," said Muir. ”
It is understood that this cost-saving program will help Global** achieve its 20% EBITDA (earnings before interest, tax, depreciation and amortization) target over the next few years.
Sir Lucian Grainge, Chairman and CEO of Global**, summed up the plan as "cut to grow" and reiterated that the key goal for 2024 is to "cut day-to-day management expenses in order to seek growth in other areas". The implication is that after the restructuring of Motown and the layoffs in Downtown, Universal** will continue to increase their layoff plans.
Before Universal**, Warner** Group (WMG) also began to lay off employees in a big way. In March, Warner** announced that it would lay off 4% of its workforce, or about 270 employees, worldwide. At the time, Warner CEO Robert Kyncl similarly stressed that "the opportunities ahead will be fully utilized" and that staff spending will be spent more on "the development of artists, songwriters and new technologies."
Now, after Spotify cut 17% of its workforce, Daniel Ek said in an open letter to employees, "Looking back on 2022 and 2023, what we have achieved is really impressive. The reality, however, is that these outputs are largely related to the resources available. By many metrics, platforms are more productive, but less efficient.
In Daniel's view, Spotify currently has too many employees who are "committed to supporting work" and "not contributing to opportunities that really impact". In the future, Spotify will strive to make the resources in its hands more abundant.
Almost at the same time, Amazon also targeted the ** department with its layoff plan. Employees in Latin America, North America and Europe have all been notified of the new round of layoffs. An Amazon spokesperson confirmed the news in an interview with Reuters, but declined to say how many employees were affected in the latest round of layoffs.
If a company lays off employees, it is more caused by its own business situation, and when the entire industry is laying off employees, it largely reflects the cyclical problems of the industry. When the digital** industry has reached a critical juncture of structural change, everyone has chosen to readjust their strategic plans.
In the past five years, the **flow** has grown**, and during the epidemic, the world quickly shifted online, and the related development of **flow** is also very good. Therefore, from the record company to the ** platform, the personnel reserve has been greatly expanded.
According to MBW data, Universal**, Warner**, and Sony** have a total of 27,292 employees in 2022Compared with 2017, the number of students has increased by 6,600. This year, there will be a massive layoff of 2Amazon, which has 50,000 employees, hired 810,000 more employees between 2020 and 2021, surpassing the size of previous years.
However, while the enterprises in the industry are busy recruiting, the growth of the industry has come to a bottleneck period.
According to the 2023 Global Report released by the International Federation of the Phonographic Industry (IFPI), in 2022, the global **stream** revenue increased by only 115%。Compared to the previous year 24The 3% increase is more than double in just one year. At the same time, the total revenue growth of the global recording industry in 2022 is only 9%, which is far less than the growth rate of 18 in the previous year5%。
In the face of the market background of growth bottlenecks, how to spend every penny is very important for the industry.
When the winter of layoffs reduces the "cost" of personnel as promised, where will the industry look for "efficiency"?
From Universal** to Warner** to Spotify, every company talks about layoffs and the use of existing resources. It is not difficult to find that how to make full use of the existing music library resources and adjust the content strategy is the first station for each company to increase efficiency.
For Spotify, it may be in the short-lived throes of a big expansion in the audiobook and podcast space but has not yet achieved profitability. Since 2019, Spotify has spent more than $1 billion on podcast expansion, including technology refreshes, studio acquisitions, and industry-leading partnerships with top podcasters such as Joe Rogan, Alexandra Cooper, and Dax Shepard.
To this end, Daniel Ek reflects on his own "uncertainty in a market full of uncertainties, we may get carried away and overinvest", while on the other hand, he is still confident in audiobooks, believing that this business will be the key to increasing subscriptions in the future**.
Audiobooks are an area that will be very important and growing fast for Spotify in the long run. We have the ability to raise the bar to keep the user experience value at the right level for subscriptions," Daniel said during the Q2 earnings call.
In addition to audiobooks, Spotify is likely to invest the cost savings in the field of AI. Earlier this year, Spotify launched AI DJ and used it for personalized user recommendations in an effort to increase user stickiness and retention. In addition, Spotify also officially said that it will use AI technology to provide more opportunities for advertisers and make the advertising business more efficient.
In the upstream of the industry, for the three major records that have a large number of music library resources, the so-called legacy resources may refer to the catalog music in their hands to seek value growth.
According to Spotify, from 2020 to 2022, the proportion of oldies in the global weekly top song charts on its platform increased by 155. As listeners' listening Xi changes, old songs are eating into the market share of new songs. In this way, it is very "not cost-effective" to dig and cultivate a new ** person with a heartbroken heart.
Over the past year, the three major record labels have been streamlining their teams.
Universal** will restructure its label Motown under the Capitol ** group and plan to lay off employeesSince then, Motown has maintained only A&R activities, and all other operations have been handed over to Capitol;Warner** has taken a similar step in the UK, including the label Parlophone in Warner Records, which is also only responsible for A&R activities. In addition, Sony Records disbanded the Arista Nashville label and merged its artists into the higher-level Nashville, RCA and Columbia.
Interestingly, while Universal** has significantly scaled back its Motown label business, it has added more investment to its Virgin** group. According to industry speculation, the purpose of Universal's move is to further penetrate the Latin ** market through Virgin.
There is no doubt that when the mature market size in Europe and the United States tends to be saturated, the record companies are bound to be in a wider range of emerging markets, i.e. countries in Latin America, Southeast Asia, India, Nigeria, etc.
In addition, according to MBW**, record labels will also focus on adjusting the cost allocation of marketing. At present, large record companies have a large amount of marketing expenses invested in traditional terrestrial radio stations every year, and now as radio is gradually replaced by streaming, record companies are bound to reduce the cost of radio marketing and turn to streaming or socializing.
From new songs, old songs to audiobooks, from social networking to AI technology, in the past five years, the industry is still in the midst of unclear changes in the future.
But now, companies have reached a consensus to use immediate layoff plans to prepare for future changes and the next cycle.
In fact, there is no shortage of optimism in the digital industry.
In 2022, when the global economy was in a downturn, Universal** Group's revenue grew by more than 17% to $2.7 billion, while smaller record labels such as BMG saw revenue increase by 25% to 4$05.7 billion. And ahead of the biggest layoffs of the year, Spotify's global subscriber base grew to 22.6 billion paying subscribers, which is up from 2.6 billion in the second quarter of 2023200 million users, up 16% quarter-on-quarter and 3% over the same period last year, or 6 million new net users.
* The industry seems to be stable and improving, so much so that Justin Kalifowitz, founder and executive chairman of Downtown Music Holdings, has even publicly stated that "the * industry is not affected by the recession and has nothing to do with the downturn in the market as a whole." ”
However, with the rapid development of digital **, especially the outbreak of online traffic after the epidemic, the business of digital ** has expanded rapidly, and ** enterprises have also recruited a large number of employees. When the development speed of the entire Internet has slowed down significantly, the digital industry cannot be left alone, and needs to be responsible for investors, and strive to avoid the situation of overstaffing and overstaffing.
Facing the future, the industry is also bound to prepare resources and funds to cope with the uncertainty of industrial development and company operation.
On the one hand, the traffic dividend of the short-term and mobile Internet has bottomed out, and on the other hand, the benefits brought by AI, big data, and the metaverse are still far less than expectedOn the one hand, the growth rate of flow has been cut in half, and mature markets have entered the bottleneck period of stock competition, and on the other hand, the cultivation of emerging markets is a long-term battle.
However, many companies in the digital industry have invested too much in the early stage, and the future profit target has become uncertain, so it is inevitable to start with structural layoffs and gradually spread to other businesses to accumulate resources for future changes.
Fierce external competition, internal optimization and reform, and behind the tide of layoffs in the industry, there are deeper structural adjustments and business transformation pains. In the strategy of reducing costs and increasing efficiency of the entire industry, new rules, new technologies, and even new opportunities in the industry may be brewing.
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