Severance charges connected to the layoffs could reach as much as €45 million, but Spotify’s margins, “which have been stuck in limbo” will get a boost, wrote Bloomberg analysts led by Geetha Ranganathan. Though the company will be hurt by weakening economic conditions and a strengthening dollar, Spotify could follow Apple Music, which recently raised prices, analysts said.
Spotify made a massive commitment to podcasting beginning in 2019. It spent over a billion dollars on acquiring podcast networks, creation software, a hosting service and the rights to popular shows like The Joe Rogan Experience and Armchair Expert.
Still, the investments have tested investors’ patience. Shares tumbled last year as investors questioned when they’d begin seeing returns. Spotify executives said in June its podcast business would become profitable in the next one to two years.
“While we have made great progress in improving speed in the last few years, we haven’t focused as much on improving efficiency,” CEO Daniel Ek wrote in a blog post about the layoffs. “We still spend far too much time syncing on slightly different strategies, which slows us down. And in a challenging economic environment, efficiency takes on greater importance.”