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Spotify cuts around 1,500 jobs as growth slows

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Spotify tripled its headcount over the past six years is now cutting back as the cost of capital has risen
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Music streaming giant Spotify said Monday it would reduce its number of employees by around 17 percent in a bid to cut costs amid “dramatically” slower economic growth.

The announcement comes on the heels of a rare quarterly net profit of 65 million euros in October, compared to a loss of 166 million for the same period a year earlier, and following 26 percent growth in active users for the third quarter to 574 million.

Around 1,500 people will leave the company, Spotify said.

It was the latest in a series of layoffs announced in the tech industry which is cutting tens of thousands of jobs following a boom during Covid pandemic lockdowns.

“I realise that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance,” chief executive Daniel Ek wrote in a letter to employees, which was seen by AFP.

He said that in 2020 and 2021, the Swedish company “took advantage of the opportunity presented by lower-cost capital and invested significantly in team expansion, content enhancement, marketing and new verticals.”

Ek said the company now finds itself in a very different environment, noting that “economic growth has slowed dramatically and capital has become more expensive.”

“Despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big,” he added.

Ek said that in 2022 and 2023, Spotify, which is listed on the New York Stock Exchange, was “more productive but less efficient. We need to be both.”

The company had “too many people dedicated to supporting work and even doing work around the work rather than contributing to opportunities with real impact.”

– Outlook changed to Q4 loss –

Spotify said the layoffs would lead to charges of around 130-145 million euros in the fourth quarter, primarily consisting of severance-related payments.

The company also updated its fourth quarter outlook to an operating loss in the range of 93-108 million euros, compared to a previously expected profit of 37 million euros.

Spotify did not specify when it expected to see the gains of its job cuts, adding only that they would “generate meaningful operating efficiencies going forward”.

Tomas Otterbeck, head of equity research at Stockholm-based investment bank Redeye, told Swedish news agency TT he had been expecting the company to make cuts, “but that they were this big surprised me”.

He said he expected the layoffs to mainly hit the research and development department where the company has more than doubled its costs in recent years.

Spotify has invested heavily since its 2006 launch to fuel growth with expansions into new markets and, in later years, exclusive content such as podcasts.

It has invested over one billion dollars into podcasts alone.

In 2017, the company had around 3,000 staff members, more than tripling the figure to around 9,800 at the end of 2022.

– ‘Substantial action’ needed –

The company has never posted a full-year net profit and only occasionally quarterly profits despite its success in the online music market.

In the third quarter, Spotify registered a 16 percent rise in paying subscribers, which make up the bulk of the company’s revenue, to 226 million, despite price hikes.

It said it expected to exceed 600 million active users by the end of the year.

Monday’s lay-off announcement was Spotify’s third this year.

In January, the company announced around 600 job cuts, followed by another 200 in the podcast division in June.

“We debated making smaller reductions throughout 2024 and 2025,” Ek wrote in his letter.

“Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives.”

Spotify joins a number of tech firms reducing staff.

British telecom group BT said in May that it will axe up to 55,000 jobs by the end of the decade.

Tech giants Meta and Microsoft have revealed plans to reduce their workforce by as many as 10,000 employees this year.

In January, online retail giant Amazon announced it was cutting over 18,000 jobs worldwide and Google parent company Alphabet announced cuts of around 12,000 people.

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WTO ministers struggle to forge fish, farm, digital deals

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The WTO meeting in the capital of the United Arab Emirates had opened on Monday with major disagreements between the body's 164 member states on key issues
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World trade ministers were locked in disagreement on fisheries subsidies, agriculture and digital customs duties as a major WTO conference entered its last scheduled day on Thursday.

With no signs of a breakthrough at the World Trade Organization’s 13th ministerial conference (MC13) in Abu Dhabi, officials pushed back to midnight its formal closing session, initially scheduled for 8:00 pm (1600 GMT).

The meeting in the capital of the United Arab Emirates opened on Monday with disagreements between the body’s 164 member states on key issues that dominated the agenda of the talks.

They include fisheries subsidies, agriculture and a moratorium on customs duties for digital transactions.

“Everybody is working with a very positive outlook… to try to see what’s the maximum we can get done,” Indian trade minister Piyush Goyal told journalists.

“I am very confident… we will come out with significant outcomes, particularly when it refers to areas of very deep concern to large numbers” of developing countries, he added.

– Fisheries deal ‘difficult’ –

Delegates sought trade-offs as part of a potential package deal that could allow for greater agreement, as was the case during the 2022 ministerial meeting in Geneva.

A new deal on fisheries was initially viewed as the most likely outcome of the MC13 talks.

But Goyal on Thursday said: “It is very difficult to get a resolution.”

After a 2022 deal which banned subsidies contributing to illegal, undeclared and unregulated fishing, the WTO hopes to conclude a second package focusing on subsidies which result in overcapacity and overfishing.

A draft text that was meant to be circulated on Wednesday is still facing delays, said a source close to the negotiations who spoke on the condition of anonymity.

The overall negotiations “are a bit like a rollercoaster,” the source said.

– E-commerce regulations –

Another sticking point is over the extension of an e-commerce moratorium, which EU trade commissioner Valdis Dombrovskis on Thursday called “vital” to economic growth.

Since 1998, WTO members have agreed not to impose customs duties on electronic transactions.

The moratorium has been extended at most ministerial meetings since then, but objections by India and South Africa are now throwing it into jeopardy.

When asked if India would compromise on an extension, Goyal said: “Let’s see what the others are budging on.”

He warned, however, that an extension can’t be “taken for granted.”

On food security, Goyal said he was “confident” progress could be made on permanent rules governing public stockholding of food reserves — a key demand of India.

A “solution can be achieved,” Goyal said.

Big questions remain over how the outcome will address the issue of dispute settlement reform — a main point of contention between the United States and India.

Washington, under former President Donald Trump, brought the dispute settlement system to a grinding halt in 2019 by blocking the appointment of new judges to the WTO’s appeals court, its highest dispute settlement authority.

During the last WTO ministerial in 2022, member states reached a commitment to having a fully and well-functioning dispute settlement system in place by 2024.

“What we’re going to see, I think, is a quite succinct (MC13) declaration which is… not going to sort out the substance,” said a Western diplomatic source who asked not to be named.

“It will recognize the progress we have made and that there is more work to be done, and that we have committed ourselves to get… the system up and running in the course of this year.”

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Universal-TikTok feud ramps up as more songs come down

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Taylor Swift is among the Universal Music Group artists whose music has been removed from TikTok
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Universal Music Group has lambasted TikTok’s approach to AI as the feud between the two companies over song royalties escalates and popular music is expunged from the social media platform.

Earlier this month music including by Taylor Swift, The Weeknd and The Beatles left TikTok, after a breakdown in negotiations with Universal over renewing their licensing agreement, which expired January 31.

Then this week TikTok began stripping music from all artists connected to Universal’s vast publishing catalog, per the multinational music company’s requirement, with all songs written by Universal Music Publishing Group’s songwriters subject to removal.

That affects any artist who may have a publishing deal with the label — examples include Harry Styles and SZA — even if they aren’t signed under the UMG recording umbrella.

“We are in the process of carrying out Universal Music Group’s requirement to remove all songs that have been written (or co-written) by a songwriter signed to Universal Music Publishing Group, based on information they have provided,” said TikTok in a statement.

Universal fired back late Thursday in an open statement to its songwriters, saying TikTok has “not agreed to recognize the fair value of your songs.”

Along with royalties, Universal said TikTok is “refusing to respond to our concerns about AI depriving songwriters from fair compensation, or provide assurances that they will not train their AI models on your songs.”

“Every indication is that they simply do not value your music.”

Universal’s publishing arm is the second largest of its kind worldwide, meaning the feud’s impact is far-reaching.

A piece of music has two copyrights: one for the recording itself, governed by a label, and another for lyrics and composition, managed by a publisher.

That means when it comes to the Universal-TikTok battle, a record from another company like Sony or Warner could come down if a Universal writer worked on the song.

The fallout from the stalemate has triggered concern among songwriters, producers and others in the industry who rely on TikTok as a promotional tool, especially for emerging artists who increasingly count on it for exposure in the industry.

“We understand the disruption is difficult for some of you and your careers, and we are sensitive to how this may affect you around the world,” Universal continued in its statement. “We recognize that this might be uncomfortable at the moment.”

“But it is critical for the sustained future value, safety and health of the entire music ecosystem, including all music fans.”

Owned by Chinese company ByteDance, TikTok is one of the most popular social media platforms globally, with more than one billion users.

TikTok previously had accused Universal of putting “greed” above artists’ interests, while Universal has said TikTok is “trying to build a music-based business, without paying fair value for the music.”

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Riding high on AI, Nvidia is no bubble, says Wall Street

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Jensen Huang, cofounder and CEO of Nvidia, waves as he arrives for a media roundtable in Kuala Lumpur on December 8, 2023
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The emergence of AI bots like OpenAI’s ChatGPT and Google’s Bard has fueled a massive rise in share prices of chip-making juggernaut Nvidia, with its skyrocketing stock now making it the world’s fourth biggest company by market capitalization.

And for Wall Street, it’s no bubble.

Between the launch of ChatGPT on November 30, 2022, for example, and the market close on February 23, Nvidia’s share price increased fivefold, lifted to investor heaven by an insatiable hunger for so-called generative artificial intelligence.

That day Nvidia also crossed the symbolic valuation of $2 trillion, a threshold only reached by Microsoft, Apple and oil giant Saudi Aramco.

The journey has been nothing but mind boggling for a company that doesn’t even rank among the world’s top 150 firms in terms of sales, and barely in the top 1,000 in terms of employees.

On paper, this hot streak is reminiscent of the dot-com bubble, which saw the share price of fiber networking giant Cisco rise eightfold in 18 months, to the point of becoming, for a few minutes, the world’s most valuable company in terms of market capitalization in March 2000, before the tech bubble burst.

“In AI, there might be some names out there that might be getting a bit ahead of their skis from a valuation perspective, and those stories are going to work themselves out over time,” CFRA analyst Angelo Zino told AFP.

“But on the Nvidia side of things, it’s more fundamentally driven,” he said, without the “type of hype you had previously.”

Unlike the frothy days before the bubble popped in 2000, Nvidia’s actual annual net income (up an eye-popping 581 percent year-on-year) is on par with the stock price, said Larry Tentarelli of Blue Chip Daily Trend Report, a research firm.

For analysts at Wedbush Securities, the relevant parallel is not with 2000 and the end of the dot-com bubble, but rather with 1995, when the dot-com boom began.

– ‘Years ahead’ –

Despite appearances, Nvidia’s success is not out of the blue, but rather years in the making.

At the root of this 30-year-old company’s success are graphics processors or graphics cards, known as GPUs (graphics processing units) — chips with far greater computing capacity than conventional microprocessors (CPUs).

Initially developed to improve the graphics quality of video games, the company run by Jensen Huang figured out the technology was perfectly suited for developing the large language models (LLMs) that underpin generative AI interfaces such as ChatGPT.

Despite initial skepticism from Wall Street, Nvidia went down that road, years before programs like ChatGPT exploded onto the scene.

Now Nvidia’s rivals have set off in pursuit, and several of them, notably AMD and Intel, are already marketing their own AI-oriented GPUs, while Apple, Microsoft and Amazon have also developed chips with AI in mind.

But Nvidia “is years ahead” of its competitors, explained Tentarelli.

“The only real risk for Nvidia is if for some reason they run into some unexpected delay… if they can’t produce enough of these GPUs,” he said.

Unlike its rivals Intel, Micron and Texas Instruments, Nvidia, like AMD, does not manufacture its own semiconductors, but uses subcontractors, mainly the Taiwan Semiconductor Manufacturing Co.

Given the geopolitical concerns with Taiwan and China, this could be a potential weak spot, but Tentarelli attributes only a very low probability to a crisis.

– Beat Apple? –

For the time being, Zino argues, Nvidia’s business model, with no production site, is more of a strength than a weakness, as it enables it to generate higher margins and adjust its volumes more easily to demand.

When they scan the horizon, investors see no sign of a slowdown in demand for AI equipment.

For Wedbush securities, “the AI Revolution starts with Nvidia and in our view the AI party… is just getting started.”

Analysts are expecting, on average, earnings to almost double again this year compared with 2023.

“Nvidia could definitely pass Apple in 20 or 24 months and maybe sooner if it stays at the growth rate that the industry is expecting,” Tantarelli said.

As for Microsoft, the other member of the $2 trillion market cap club?

That’s a taller order, as Microsoft “is also doing a very good job” in AI, Tantarelli said.

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