Vote up the companies you think made smart cuts. Vote down the companies making layoffs that don't add up to you.
It's hard to escape talk of the economy sometimes - especially when things look uncertain. In late 2022, the economic climate became so concerning to analysts and experts that there was even the use of the “R” word - recession.
In order to stave off a recession, the Federal Reserve has adjusted interest rates several times. Major companies have cut back on expenses, most notably those in the technology sector. But there's no clear indication of what will actually happen next.
The number of layoffs from technology companies has, nonetheless, stoked some panic. And there may be more forthcoming. Companies like SiriusXM have made it known they intend to cut costs, but the specifics of what that looks like remain unclear.
We know the names of these companies, we use their products, and we can't help but want to understand what their actions mean in the larger economic environment. Why are they cutting? Are the cuts justified to you? Do they suggest that the economy is indeed worth worrying about right now? Take a look, decide for yourself, and vote.
2022 Revenue (for AT&T, which owns DirecTV): $120.74 billion
When The Cuts Happened: January 2023
What The Workforce Was: 10,000
How Many People Were Cut: 500
The Reasons Given: DirecTV (owned by AT&T) announced it was cutting 10% of its managers (who made up nearly half of its workforce) because, as a representative from the company put it:
The entire pay-TV industry is impacted by the secular decline and the increasing rates to secure and distribute programming… We’re adjusting our operations costs to align with these changes and will continue to invest in new entertainment products and service enhancements.
DirecTV reportedly lost nearly half a million subscribers during the third quarter of 2022 - the highest among satellite-TV providers during the time period, per Leichtman Research Group.
The Conversation: During the pandemic, DirecTV faced blackouts, resistance to having technicians in one's home, and competition from streaming platforms - all factors that led to moderate gains in subscribers. In June 2020, AT&T executive Jeff McElfresh reiterated: "Where there is not competitive broadband available for a household or consumer, our lead offer was, is, and will be our DirecTV satellite offer. It is the best alternative option because broadband is not available in the rural parts of the states and in some cases, in some suburb areas."
While this may have been the case, improvements to rural internet access and the like have led to even more pressure on satellite TV providers. Additional increases in fees paid by satellite TV providers to carry channels that are then passed onto consumers have led to continued losses for DirecTV.
The Reasons Given: The impetus for Warner Bros. Discovery's layoffs and content cancellations was the merger between Discovery and WarnerMedia in April 2022. Warner Bros. Discovery (the name of the newly joined companies) became home to properties like CNN, HBO, and Warner Bros. Pictures.
Warner Bros. Discovery laid off about 1,000 workers 30% of its sales teams) in September 2022. An additional 14% reduction of programming operations personnel at HBO and HBO Max and cuts from Warner Bros. Discovery's television group and the sports divisions as the company looked to cut $3 billion in costs. Layoffs of about 1,200 employees have been reported.
The Conversation: Divisions of Warner Bros. experienced layoffs in August and November 2022 alongside decisions to cut projects and generally "restructure." According to WarnerMedia CFO Gunnar Wiedenfels, 2023 is going to be the year of “relaunching and building.” He continued:
From my perspective, we really have command and control over the business now… We’re really on track for a lot of asset value creation and free cashflow generation.
The Reasons Given: When Wayfair laid off roughly 5% of its workforce in August 2022, it was on the heels of large quarterly losses. Alongside those cuts, another 10% of the global headcount in early 2023 resulted from what CEO Niraj Shah attributed to losing sight of "some of our fundamentals." He also said Wayfair "grew too big" and the company would streamline and simplify in the interest of overall cost reduction.
The Conversation: Consumers are spending less money on things like furniture and home goods as "disposable income" shrank during late 2022. Price increases in grocery stores, supply chain issues, and a decrease in online shopping have all contributed to the online-only retailer's decision to "right-size."
The Reasons Given: In a statement to employees, or Zoomies, Zoom CEO Eric S. Yuan was forthcoming about what led to a 15% reduction in the company's workforce:
As the world transitions to life post-pandemic, we are seeing that people and businesses continue to rely on Zoom. But the uncertainty of the global economy, and its effect on our customers, means we need to take a hard – yet important – look inward to reset ourselves so we can weather the economic environment, deliver for our customers and achieve Zoom’s long-term vision.
Zoom was more or less essential during the pandemic and, as a result, the company hired 275 employees between July 2019 and October 2022. As Yuan pointed out, the transition back to in-person work and play meant less reliance on the online communication tool.
In addition to the layoffs, Yuan indicated his own salary would be reduced and he would not receive a bonus in 2023.
The Conversation: When JPMorgan CEO Jamie Dimon called Zoom meetings and working from home "management by Hollywood Squares," it reflected a mindset that workers in office settings were more productive.
Cuts at Zoom are indicative of a post-pandemic transition, but also reflect uncertainty related to the larger economic landscape. In August 2022, analysts reported that Zoom was poised for between a 7% and 8% decline in 2023.
The Reasons Given: On the heels of a 9% workforce reduction in April 2022, investment company Robinhood laid off 1,100 additional employees in August 2022 - or another 23% of workers.
According to Robinhood CEO Vlad Tenev, the company needed to "flatten hierarchies, reduce cross-functional dependencies, and remove redundant roles and positions" after overstaffing in anticipation of unrealized growth in 2022.
The Conversation: In the words of analyst Dan Dolev, Robinhood "overhired" like numerous other companies when "money was easy." Robinhood was also involved in cryptocurrency trade that resulted in a $30 million fine by the New York State Department of Financial Services:
As its business grew, Robinhood Crypto failed to invest the proper resources and attention to develop and maintain a culture of compliance — a failure that resulted in significant violations of the Department’s anti-money laundering and cybersecurity regulations.
Robinhood has experienced a 60% fall in its stock prices, as of February 2023. This has prompted speculation about whether or not the company can rebound. If cryptocurrency experiences growth, Robinhood may as well but investment experts remain divided about the future of the company.
The Reasons Given: When Spotify CEO Daniel Ek announced layoffs at the company, it was part of an organizational restructure intended to optimize "efficiency, control costs, and speed up decision-making." The exit of Spotify executive Dawn Ostroff was one change but Ek took "full accountability" for the 6% cut in personnel across the company:
I hoped to sustain the strong tailwinds from the pandemic and believed that our broad global business and lower risk to the impact of a slowdown in ads would insulate us. In hindsight, I was too ambitious in investing ahead of our revenue growth.
Ek said in February 2023 that the company "overinvested" in podcasts and audiobooks, reflective of the shift Spotify has undertaken since the layoffs.
The Conversation: After large financial resources were channeled into podcasts, Spotify failed to see quick enough gains. Even before the larger cuts in early 2023, Spotify had downsized Gimlet Media and Parcast, two major podcast channels.
Despite observations that Spotify made a mistake in allocating so many resources to podcasting, Ek doesn't think that's entirely true. That said, in March 2023, Spotify will provide detailed information about new tools and technologies intended to be the new focus of the music platform going forward.
