Music streaming service, Spotify, plans to lay off roughly 17% of its global workforce in a subsequent round of layoffs due to the slowing economy.
The Times reported that this number, according to the streamer’s CEO, Mr. Daniel Ek, corresponds to about 1,500 of its 9,000 employees.
Although the Swedish company Spotify stated earlier in January that it would reduce staff by 6% and announce a slowdown in hiring in October, this cost-cutting measure goes far further.
The majority of Spotify employees who are affected by the layoffs will be eligible for two months of outplacement services in addition to receiving roughly five months of severance pay, which includes healthcare.
Even though the company reported a $34.8 million profit and increased revenues by 11% year over year in the third quarter of the year, Mr. Ek claimed that the move was a “strategic orientation” rather than a “step back.”
“We’ve focused a lot of effort over the past two years to make Spotify a truly amazing and long-lasting company that will continuously drive profitability and growth going forward in order to fulfil our vision of becoming the world’s preeminent audio company,” Mr. Ek stated on the company blog.
“As I’ve said many times, we’ve made commendable progress, but there is still work to be done. Capital has grown more costly and economic growth has abruptly slowed. Spotify is not an excluded from these realities.”
“I understand that a cut this size will seem surprisingly big to many, considering our performance and the recent upbeat earnings report,” he continued.
“We discussed reducing by a smaller amount in 2024 and 2025. However, taking into account 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 a significant step to right size our costs,” he continued.
“Even though I am certain that this is the best course of action for our business, I also recognize that it will be extremely difficult for our team.”
He mentioned that Spotify had “taken advantage of the opportunity presented by lower-cost capital” in 2020 and 2021, increasing staffing, marketing, content enhancement, and new verticals “significantly.”
While these generally aided Spotify’s growth, the executive claimed that the company was now operating in “a very different environment.” “This past year, we reduced costs, but our cost structure is still too big for where we need to be.”
