Spotify CEO Daniel Ek revealed that the company is laying off 17 percent of its workforce across all departments. The decision, Ek stated in a company press release, is driven by the anticipated challenges ahead, and he opted for immediate, substantial cuts instead of incremental reductions over an extended period. Employees affected by the layoffs will receive notifications later today.
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Ek acknowledged that the magnitude of this reduction might be unexpectedly large for many, especially in light of the recent positive earnings report and the company’s overall performance. He explained that despite considering smaller reductions over the next few years, the significant gap between the company’s financial goals and current operational costs led him to choose a more substantial action to align costs with objectives. While Ek expressed confidence in the decision’s necessity, he acknowledged the considerable impact it would have on the team.
The CEO highlighted Spotify’s significant expansion in 2020 and 2021, driven by the lower cost of capital, which contributed to increased output and robust growth. Despite prior layoffs in 2023 (6 percent reduction early in the year and an additional 2 percent in May), the company’s cost structure remains larger than needed.
Following these layoffs, Spotify, which had around 9,000 employees, will see approximately 1,500 employees losing their jobs (4,300 of those jobs were in the US as of 2022). To mitigate the impact, Ek mentioned that Spotify would provide an average of five months’ severance pay, cover healthcare during that period, and offer immigration/career support.
Ek emphasized that for the company’s next phase, operating in a lean manner is not just an option but a necessity. In the previous month, Spotify introduced a revamped royalty model aimed at giving “working artists” a larger share while addressing issues related to fraudulent streams.
Despite consistent growth, with 574 million monthly active users, a 26 percent increase over the same period last year, Spotify has struggled to turn a consistent profit, with the last quarter being a rare exception. Ek promised to provide more information about the implications of these changes in the coming days and weeks, though this offers little solace to employees facing sudden unemployment just before the holidays.
