expect revenue per employee to climb next year

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Tech workforces inflated during the pandemic were cut to ribbons this year. More than 250,000 lay-offs have been announced in the year to date, according to online data aggregator Layoffs.fyi. advance cutbacks came from job listing removals and decisions to not exchange workers who left. In the past two months companies including Nokia, Broadcom, LinkedIn and Twilio have all announced cuts. This week music streaming services Spotify and Tidal joined the group. 

Spotify’s scheme to cut its headcount by 17 per cent is the music streaming company’s third reduction this year. Chief executive Daniel Ek’s vague talk of operating efficiencies is proving popular with investors. The share price is up 137 per cent in the year to date. Yet look at the size of the remaining workforce and it seems possible that more cuts are coming.

Spotify last reported 9,241 full time employees. Downsize that by 17 per cent and the total is 7,671. If there are no more cuts then forecast sales of $16.8bn next year will be equal to $2.2mn per employee. differentiate that with a company such as Meta, where revenues next year will also be equal to about $2.2mn a head in the estimated post-lay-off workforce, and it looks admire a suitable size.

But a better comparison is Netflix, another entertainment platform that relies on subscriptions and advertising and which is expected to report just over $38bn in revenues next year. This is equivalent to $3mn per employee.

admire Netflix, Spotify is a well-known global brand. It is trying to balance subscription rate increases with competition from the likes of Amazon and YouTube Music. Unlike Netflix, it has reported no net income. Richard Kramer at Arete Research points out that it also lacks the library of intellectual property that Netflix has been building.

Raising per-employee metrics is one way to assess productive operations. Even after job cuts, tech-sector headcounts remain above pre-pandemic totals. Expect workforce cuts to continue in 2024.