Spotify cuts this week suggest ‘unsustainable business model’

On the latest episode of the Mumbrellacast, the Mumbrella team look at the shock cuts announced by Spotify this week, which saw CEO Daniel Ek announce that 17% of the organisation’s total headcount were being let go.

Given that just weeks ago, Spotify podcast account director for JAPAC, Sam Moles, told Mumbrella in an interview that podcast exclusivity will no longer be a priority for the business – despite Joe Rogan’s reported $200 million deal in 2020 – and the fact that artists continue to skewer the service for poor royalty fees (most recently Weird Al Yankovic jokingly shared with his fans that he received just $12 despite garnering over 80 million streams in 2023), Mumbrella deputy editor Nathan Jolly said something needs to change.

“The whole Spotify thing seems like an unsustainable business model,” Jolly said on the Mumbrellacast.

“Their money’s got to come from somewhere. The insulting royalty rates they pay, all the complaints; for them to go and throw hundreds of millions of dollars at podcasts seems like a bad move in terms of optics, but also just a terrible financial decision.

“People don’t pay for podcasts, people did want to pay for music. It’s kind of like a complete flip of the model.”

Mumbrella publisher Adam Lang added that it will be interesting to see how Spotify will utilise advertising moving forward under the new business model, with Ek saying earlier this week: “The Spotify of tomorrow must be defined by being relentlessly resourceful in the ways we operate, innovate, and tackle problems.”

Lang said: “… when Foxtel first came out, it had no ads, and then ads came in. And so, you knew that part of your subscription was being subsidized by advertising and then they got different pricing models.

“I think [Spotify has] to look at their price point. I think they do have a business model challenge and they do have to look at their price point… and we’ve seen what Netflix has done in the last couple of years with that. They’ve shown that there is a market for people who are willing to pay less and accept advertising. And there is a market for people who are willing to pay more and wish for no advertising at all.

“So, we’ll see how those different models and pricing points come out. I think that’s really one to watch.”

Listen to the full Mumbrellacast episode here.


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