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In an SEC filing this week, Roku indicated that it plans to cut around 200 jobs, or roughly 5% of its total workforce. The company expects to spend about $28 to $31 million on the downsizing scheme, largely due to severance payments and other employee benefit contributions. Most of this will occur during Q4 of 2022 and Q1 of 2023. After the news hit the wires, Roku stock dropped another 3%, capping off a rough year for the company that has seen its value crater by close to 90% from its July 2021 high.
The lion's share of the blame, once more, went to the soft digital ad market, which the company also cited earlier this month when presenting its disappointing Q3 earnings. (Roku missed Wall Street expectations by around $41 million.) Executives forecast total net revenue of around $800 million during Q4 of this year, which would represent a 7.5% decline from 2021’s numbers. That’s based on both a presumptive drop in discretionary spending by consumers this holiday season (on items like Roku devices), and below-average demand from potential advertisers on Roku Channel programming.
Roku’s certainly not the only company that’s pointing to the advertising market as a source of recent headaches. Speaking this week at a conference sponsored by the Royal Bank of Canada, Warner Bros. Discovery CEO David Zaslav looked ahead at a challenging 2023 based on a significant pullback in ad spending, and opined that the current marketplace is in worse shape than at any point during the COVID pandemic and lockdown of 2020.
Like Roku, WBD compensated for the loss of ad dollars via layoffs, which to date have impacted development staff at HBO, HBO Max, Cartoon Network, TBS and TNT, along with members of the company’s ad sales team. More layoffs are likely on the way as well, with incoming CNN chief Chris Licht looking to cut costs and the management team predicting they’ll spend over $1 billion on severance packages and other downsizing efforts next year.
At this point, it would almost be simpler to list the major media and entertainment companies that have not made ad market-related layoffs over the last several months. Amazon, now the first public company in history to lose over $1 trillion in value, recently announced plans to trim 10,000 corporate employees, or about 3% of its total corporate workforce.
Snap axed 1,200 staffers – or about 20% of the company’s full-time workforce – in September, which turned into a messy and chaotic scene when the company began logging former employees out of their computer system before they’d even been informed that they’d been let go. The app and hardware makers are facing something of a perfect storm at this point, not only taking a hit on ad dollars but coming off an aggressive ramp-up in spending during the pandemic, nearly doubling the size of its workforce and acquiring AR display manufacturers WaveOptics.
Spotify dismissed at least 38 employees from its Gimlet and Parcast podcasting teams and canceled 11 original shows. Collectively, that accounts for around 30% of the membership of the Gimlet and Parcast labor unions. Representatives for those unions said the cuts amounted to “massive restructurings” of the entire team and noted that employees were given as little as an hour to close out and transition their work. Culled podcasts include “How to Save a Planet,” “Crime Show,” “Medical Murders” and “Horoscope Today.”
Instagram and Facebook owner Meta let go of around 13% of its staff earlier this month, around 11,000 employees in total. Amid a difficult marketplace for ad sales, Meta’s costs and expenses jumped by 19% in Q3 over 2022, hitting $22.1 billion. Much of this resulted from founder and CEO Mark Zuckerberg’s enthusiastic investment in the “metaverse,” a still-largely-theoretical digital world accessible via VR and AR headsets. Meta has spent $9.4 billion on metaverse innovations so far this year, without much in the way of new revenue streams to show for it thus far.
Twitter, of course, has continued to make major cuts under the watchful eye of new owner Elon Musk. The frequently-imitated CEO eliminated much of the company’s full-time workforce via email upon assuming control of the company in early November and has continued making cuts ever since (sometimes via tweet!) Some of this is obviously about public relations, putting his own stamp on the company, and paying down the considerable debt that he took on during the acquisition. But Twitter’s layoffs have also resulted from a sudden drop in advertising revenue, due both to the general downturn in the market and specific concerns about the new Twitter under Musk’s at times erratic leadership.
At some point, it seems likely that the advertising market will rebound. Some of the market forces that triggered corporations to cut their ad budgets to begin with – like inflation fears and supply chain problems – have already started to ease. Still, many mature tech companies are likely already past the point of no return, and won’t ever return to the salad days of the late ‘00s and ‘10s, when exponential growth was not only possible but likely for breakout new products and apps. In a conversation for this week’s edition of Vox’s “Today, Explained,” Recode’s Peter Kafka says Silicon Valley is not going through a traditional downsizing, but a “cultural reset,” permanently tapping the brakes on the extravagant spending of the previous era. - Lon Harris
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