Spotify Announces 17% Staff Reduction in Latest Round of Tech Layoffs
Spotify, the music streaming leader, has revealed that it will reduce its staff by 17% in a drastic attempt to cut costs.
CEO Daniel Ek told employees in a memo that the company needed to "rightsize" its finances after over-hiring in 2020 and 2021, when capital was more affordable.
"Being relentlessly resourceful in the ways we operate, innovate, and tackle problems is what defines the Spotify of tomorrow," Ek wrote. "This kind of resourcefulness goes beyond the basic meaning — it's about getting ready for our next stage, where being lean is a necessity, not a choice."This is the third time this year that Spotify has made cuts — this time affecting about 1,500 workers, based on a CNBC source who said the Swedish firm has around 9,000 employees in over 40 offices worldwide.
The tech sector has seen massive layoffs in the past year as the pandemic-driven surge fades away. The tech job tracker layoffs.fyi reports that more than 250,000 tech employees have lost their jobs since the beginning of the year.
Ek wrote that the Spotify cuts may seem "surprisingly large" for now. The company reported $34 million in operating income in its third-quarter earnings call, its first quarterly profit since 2021. One of the reasons for saving costs was lower personnel expenses, thanks to two earlier rounds of cuts.
The company slashed 6% of its staff, about 600 workers, in January. It fired another 2% of employees, around 200 roles, in June.
Meanwhile, Spotify increased its subscription fees and aimed to reach a billion users by 2023. It now has more than 570 million of them — almost twice as many as the listeners it had in 2020.
The company has also expressed its ambition to go beyond music and grow in audiobooks and podcasting, a market that faces financial pressure and fierce rivalry for both audiences and advertisers. Since 2019, Spotify has spent nearly a billion dollars acquiring podcasting studios, signing exclusive contracts with famous hosts and, most recently, investing in generative AI for ad production.
But all this spending has brought along major troubles — and still failed to make a profit. The company's layoffs in June were mainly aimed at shrinking its podcast unit.
As of 8:30 a.m. on Monday, Spotify's shares had risen by about 5% in premarket trading.
According to Ek's statement, employees who are leaving will receive about five months of severance pay plus healthcare coverage, vacation pay, immigration support and two months of career-search assistance.