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Comment by tracerbulletx | Hacker News Reader

Every damned time this happens someone asks how it's possible they have so many employees when it's just an app... Spotify owns multiple large podcast studios, has sales people, negotiators, music industry people, lawyers, facility staff, lawyers, marketing, content curators. It is the business engine through which the vast majority of the world consumes music these days. You can quibble about if they have too many engineering employees, but at least get the real number first.

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Spotify's issues and costs are royalty payments. Of the €567 million increase in cost of revenue for the Nine months ended September 30, 2023, higher royalty costs were €534 million of that total. (~94%) [1] This delta is vs 7,159 total cost of revenue on 9,576 of revenue (€millions).[1, pg4] From looking at the rest of the report, most other cost of revenue contributors are minor (5 here, 10 there).

In the total category, R&D (1,257), S&M (1,101), G&A (430). R&D trending up, possibly plateauing, S&M, G&A trending down. [1, pg4] All relatively minor compared to 7,159. (<=1/6)

[1] pg 36, Spotify 2023 Financial Report, "Spotify Technology S.A.", FORM 6-K, October, 2023 - https://s29.q4cdn.com/175625835/files/doc_financials/2023/q3...

R&D increased as a % of revenue YOY. I think the increased cost of revenue is part of the story, the other being salaries and benefits rolling up to R&D

The R&D expense is fully within their control, while things are a bit more complex with licensing costs.

If Spotify is struggling to pay royalties they can make their own music

This seems false, Whatsapp became 'the business engine through which the vast majority of the world' sends texts on the backs of 20ish employees.

Even assuming delivering music, podcasts, royalty payments, negotiations with artists, etc..., takes 100x more headcount in total, that should still be only around 2000 employees.

9000 just means most are not being that productive.

Obviously you can do it leaner, if they couldn't they wouldn't be firing people. My point is that you shouldn't be trying to estimate based on the technical side when most of the head count is negotiating with record companies and producing podcasts. In any case I personally wouldn't be so obsessed with every company running as lean as possible, great way to have 5 people make 10 billion dollars and everyone else just gets to pound sand. In a healthy society companies should run fat to keep people employed, engaged, trained up, ready to fill in as a replacement, and lots and lots of vacation time.

> ...when most of the head count is negotiating with record companies and producing podcasts.

Can you link the source?

It does sound extreme doesn’t it!

But I wonder if they have to replicate non-dev teams in multiple countries?

I’d imagine they have to a seperate legal, promotional, marketing, sales and so on teams for each market.

Replicating these business functions quickly adds up to thousands of people employed!

As an English speaker I tend to think of music as being all in English, but each region has its own musical culture that would need addressing.

France I believe mandates a certain amount of French speaking songs.

Apples and Oranges, not from a complexity perspective but WA was majorly subsidized by VC and later FB without monetization for years.

Spotify has a completely different business model, architecture etc.

agreed. the population has probably passed an inflection point where bureaucracy is at its peak, crosscutting concerns are unavoidable, and communication chains too long and winding to be considered communication at all. but we’re talking of the genetrix of some of the modern modes of organizing work and workers. i'm more hopeful that they’ll be able to do the right thing, even if it doesn’t mean reducing workforce to the irreducible minimum.

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