Around 1,500 employees of Swedish audio platform Spotify are destined to lose their jobs after the company announced it was implementing a fresh round of layoffs in an effort to reign in costs.
The job cuts amount to a 17 percent reduction in Spotify’s global workforce, which was stacked at a time when Spotify was looking toward international expansion and skyrocketing growth.
That growth has cooled in recent years, and Spotify has issued pink slips numerous times in the past in order to address slowing business and rising costs. Though Spotify has started to turn its business around, Spotify CEO Daniel Ek said further cuts were needed in order to stabilize the company.
“I recognize this will impact a number of individuals who have made valuable contributions. To be blunt, many smart, talented and hard-working people will be departing us,” Ek said in a note sent to Spotify employees on Monday. “For those leaving, we’re a better company because of your dedication and hard work. Thank you for sharing your talents with us. I hope you know that your contributions have impacted more than half a billion people and millions of artists, creators, and authors around the world in profound ways.”
Ek said he realized the cuts would come as a surprise to many from within and outside the company alike, given Spotify’s recent quarterly earnings report, which saw its revenue rise to $3.6 billion, or 11 percent on a year-over basis. To that end, Ek said the company briefly considered smaller staff reductions throughout the next two years in order to address rising costs associated with delivering it streaming audio service to users.
“Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives,” Ek said. “While I am convinced this is the right action for our company, I also understand it will be incredibly painful for our team.”
Ek said that the company took advantage of “lower-cost capital,” which allowed Spotify to invest “significantly in team expansion, content enhancement, marketing, and new verticals.”
“These investments generally worked, contributing to Spotify’s increased output and the platform’s robust growth this past year. However, we now find ourselves in a very different environment,” Ek said. “And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big.”
Ek said departing employees will receive a baseline severance pay, with most getting around five months of their income. There will also be healthcare and immigration support for a period of time, and employees with unused vacation and paid time off will be paid out in their final checks.
“The decision to reduce our team size is a hard but crucial step towards forging a stronger, more efficient Spotify for the future,” Ek affirmed. “It also highlights that we need to change how we work. In Spotify’s early days, our success was hard won. We had limited resources and had to make the most of every asset. Our ingenuity and creativity were what set us apart. As we’ve grown, we’ve moved too far away from this core principle of resourcefulness.”
As Spotify moves forward, the company will have to figure out how to do more and better work with the limited resources it will have. “With a more targeted approach, every investment and initiative becomes more impactful, offering greater opportunities for success,” Ek wrote. “This is not a step back; it’s a strategic reorientation. We’re still committed to investing and making bold bets, but now, with a more focused approach, ensuring Spotify’s continued profitability and ability to innovate. Lean doesn’t mean small ambitions; it means smarter, more impactful paths to achieve them.”
For users, not much is expected to change. Spotify recently increased its monthly premium price to $11 per month, aligning it with others in the space like Apple Music and Amazon Music. The company recently introduced a limited amount of audiobooks, which allows streamers to listen to about 15 hours of content from premium titles each month, and has invested in building up its on-demand audio business, including podcasts.