Spotify to lay off 17% of its workforce in third round of job cuts
Spotify announced on Monday it will lay off 17% of its workforce, or about 1,500 employees, to bring down costs. The latest round of job cuts comes after the music-streaming giant laid off 600 of its staff in January, and 200 more in June.
In a message to the staff, Spotify CEO Daniel Ek said the decision for recent cuts is due to the slowdown in economic growth and the increasing costs. He added that these measures are aimed at making Spotify a more streamlined and efficient company.
“Today, we still have too many people dedicated to supporting work and even doing work around the work rather than contributing to opportunities with real impact,” Ek wrote. “As we’ve grown, we’ve moved too far away from this core principle of resourcefulness,” Ek said.
Ek also added that the company hired more people in 2020 and 2021 because of the lower cost of capital. Although the company’s output has seen a boost during this period, Ek attributed much of it to having additional resources at their disposal.
The layoff will cost the company between 130 million to 145 million euros in the fourth quarter due to the recent layoffs, with the majority of the cash component set to be recorded in the first and second fiscal quarters of 2024, the company said in a statement.
Spotify has also revised its fourth-quarter operating loss estimate to be between 93 million euros and 108 million euros, a shift from its previous projection of an operating profit of 37 million euros.
The company, known for its significant investment in the podcasting sector and partnerships with celebrities like Kim Kardashian, Prince Harry, and Meghan Markle, has been expanding its global presence to reach a billion users by 2030.
Despite a profitable third quarter driven by price increases in its streaming services and subscriber growth worldwide, CEO Daniel Ek emphasized the need for efficiency, stating that the company was focusing on maximizing productivity while maintaining efficiency. Ek acknowledged that, although the company had shown increased productivity by various metrics, it also needed to enhance efficiency.
The layoffs, which come after a positive earnings report, are considered substantial, and Ek admitted that they might feel significant to employees. He mentioned that the decision to implement a significant reduction was made to align operational costs with the company’s financial goals.
“By most metrics, we were more productive but less efficient. We need to be both,” Ek said.
Spotify said that affected employees will be notified starting Monday and will receive five months of severance pay, vacation pay, and healthcare coverage for the severance period. Ek revealed that the option of making smaller reductions over the next few years was considered, but given the gap between financial goals and current operational costs, a substantial action was deemed the best approach to achieving the company’s objectives.
“We debated making smaller reductions throughout 2024 and 2025,” Ek added. “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 is one of the world’s most popular music streaming services, with over 356 million monthly active users, including 158 million premium subscribers. The music-streaming behemoth has seen explosive growth in revenue and customer base in recent years.
Spotify started in October 2008 in Stockholm, Sweden as a commercial music streaming service that provides restricted digital content from a range of record labels and artists. The company also provides a freemium service; basic features are free with advertisements or limitations.