Spotify to Lay Off 17% of Staff, Its Third Round of Job Cuts This Year
The streaming giant will cut about 1,500 more jobs as it accelerates a profitability push.
Spotify is preparing to lay off 17% of its workforce or about 1,500 employees, as the company accelerates its profitability push.
Chief Executive Daniel Ek announced the job cuts—the Stockholm-based company’s third round of layoffs this year—to staff Monday.
Despite efforts to reduce costs, Ek said Spotify is still spending too much money. The audio streaming company has been squeezed by slower economic growth as well as interest-rate increases that have made it more expensive to borrow, he said.
“The Spotify of tomorrow must be defined by being relentlessly resourceful in the ways we operate, innovate, and tackle problems,” he said in a 1,000-word letter to staff. “Being lean is not just an option but a necessity.”
Spotify, like other tech companies, grew in size and scope during the pandemic, with its head count nearly doubling over the last three years to more than 8,000 workers, as a result of hiring and acquisitions. As investors have become more focused on profitability than growth, many streaming-focused companies have aggressively cut costs.
At Spotify that meant scaling back a $1 billion bet on podcasting, including through layoffs earlier this year. It continues to back top podcasters Joe Rogan, Alex Cooper and Emma Chamberlain, and stopped making a number of other shows such as Meghan Markle’s “Archetypes.”
Spotify, which reported a 462 million euro loss—equivalent to about $503 million—in the first nine months of the year, is trying to balance investments in emerging areas such as its growing ad business with the need to become consistently profitable. The company also is focused on its audiobooks offering, which rolled out to subscribers in the U.S. last month.
Last year, during its first investor day since going public, Ek said he wants Spotify to be the world’s largest audio company and announced ambitious growth targets, such as generating $100 billion in revenue by 2030. He said the company plans to reach profitability by 2024.
As investor pressure to hit that profitability goal increased over the last year, Ek told executives to look for ways to cut costs. The company expects the fresh round of layoffs to help it reach its profitability target faster.
In Monday’s letter, Ek said substantial cuts were the best option for accomplishing the company’s objectives and thanked laid-off employees for their help growing the company.
“To be blunt, many smart, talented and hard-working people will be departing us,” he said. The average employee will receive five months of severance pay.
A leaner structure will change the way Spotify employees work and allow the company to invest profits more strategically back into the business, Ek said.
“Lean doesn’t mean that we have small ambitions,” Chief Financial Officer Paul Vogel said in an interview. The company will be more thoughtful with its future spending and focus on areas that are driving the most growth, he said.
Spotify posted a surprise profit in the third quarter and stronger-than-expected subscriber and user growth. The company raised the price of its subscription in the U.S. and other major markets over the summer, a long-awaited increase the company said hasn’t led to higher churn.
The restructuring marks Spotify’s third round of significant layoffs this year. In January the company said it would lay off about 600 employees, or 6% of staff. In June it announced plans to trim an additional 200 jobs, or 2% of its workforce.
Those cuts also brought changes to the C-suite, including the departure of Chief Content Officer Dawn Ostroff, a key architect of the company’s expansion into podcasting. The company was reorganized under Co-Presidents Gustav Söderström and Alex Norström.
Write to Anne Steele at anne.steele@wsj.com
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First Published:4 Dec 2023, 01:21 PM IST
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