Spotify, the renowned music streaming platform, has announced its decision to lay off approximately 1,500 employees, constituting 17% of its workforce, as part of ongoing cost-cutting efforts. This move follows previous rounds of layoffs with 600 job cuts in January and an additional 200 in June.
In a letter addressed to employees, Spotify CEO Daniel Ek explained that the decision to reduce the workforce is aimed at bringing down costs. The company had expanded its team significantly in 2020 and 2021, leveraging the lower cost of capital. Despite increased output, Ek noted that much of it was linked to having more resources.
Spotify, known for its push into the podcasting realm, invested over a billion dollars in its podcast business, securing partnerships with high-profile celebrities like Kim Kardashian, Prince Harry, and Meghan Markle. The company has been expanding its market presence globally with the ambitious goal of reaching a billion users by 2030. As of now, Spotify boasts 601 million users, a substantial increase from the 345 million reported at the end of 2020.
While the company reported a profit in the third quarter, driven by price hikes in its streaming services and growing subscribers, Ek emphasized the need for efficiencies to maximize each dollar. Despite positive earnings, the CEO acknowledged that the reduction in workforce would feel significant.
“By most metrics, we were more productive but less efficient. We need to be both,” Ek stated.
Affected employees will be informed starting Monday and will receive about five months of severance pay, along with vacation pay and healthcare coverage for the severance period. Additionally, Spotify will provide immigration support to employees whose immigration status is linked to their employment.
Ek explained the rationale behind the substantial action, stating, “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.” The move comes amid a broader trend of tech companies revisiting their workforce structures despite positive financial performances.
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