This year, Spotify has laid off its staff for the third time. CEO Daniel Ek said in a press release on Monday that Spotify is cutting off 1,500 employees (17% of its workforce) in an unexpected pre-holiday surprise. What Ek referred to as “the challenges ahead” are the reason for the cuts, and he decided to implement them right away rather than gradually reducing them in lesser amounts. Later today, he said, affected staff will receive notifications.
“I realize that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance,” Ek stated. We discussed reducing it by a smaller amount in 2024 and 2025. However, considering the difference between our current operational costs and our financial goal state, I determined that the best course of action to achieve our objectives would be to take significant steps to right-size our costs. Although I am certain that this is the best course of action for our business, I am also aware that our staff will suffer greatly as a result.”
Ek continued by saying that the company’s significant growth in 2020 and 2021 was brought about by the lower cost of capital. “These investments generally worked, contributing to Spotify’s increased output and the platform’s robust growth this past year,” he stated. Furthermore, despite the labor cutbacks from the previous year, the company let go of 6% of its employees in early 2023 and an additional 2% in May—”our cost structure for where we need to be is still too big,” Ek stated.
Following previous rounds of layoffs, Spotify employed over 9,000 people; as a result, the most recent round of cuts will result in the loss of about 1,500 positions, 4,300 of which were in the US as of 2022. Ek stated that Spotify will cover healthcare costs during that period, pay an average of five months’ severance, and offer immigration and career support to lessen the damage.
As for the future phase of the organization, Ek stated that “being lean is not just an option but a necessity.” Spotify unveiled a revised payment structure last month with the goal of rewarding “working artists” more while decreasing fake streams.
Since its launch, Spotify has steadily increased its user base, reaching 574 million monthly active users, a 26% increase from the same time last year. The business has never been able to turn a profit, but the most recent quarter was an unusual exception. When workers unexpectedly find themselves without a job right before the holidays, Ek’s promise of additional details about the changes “in the days and weeks ahead” will come as cold consolation.
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