In a pre-holiday shocker, Spotify is shedding 17 p.c of its workforce throughout the corporate, CEO Daniel Ek introduced in an organization press launch. The cuts are being made as a consequence of what Ek referred to as “the challenges ahead” and he elected to make them instantly as a substitute of doing smaller reductions over time. Affected workers will probably be notified later immediately, he added.
“I realize that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance,” Ek wrote. “We debated making smaller reductions throughout 2024 and 2025. Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to right-size our costs was the best option to accomplish our objectives. While I am convinced this is the right action for our company, I also understand it will be incredibly painful for our team.”
Ek went on to notice that the corporate expanded significantly in 2020 and 2021 as a result of decrease price of capital. “These investments generally worked, contributing to Spotify’s increased output and the platform’s robust growth this past year,” he mentioned. And regardless of reductions made final 12 months — the corporate laid off 6 p.c of its workforce early in 2023 and one other 2 p.c in Might — “our cost structure for where we need to be is still too big,” Ek mentioned.
Comply with these rounds of layoffs, Spotify had round 9,000 workers, so the newest cuts will see round 1,500 workers shedding their jobs (4,300 of these jobs had been within the US as of 2022). To melt the blow, Ek mentioned Spotify can pay a median of 5 months severance, cowl healthcare throughout that point and supply immigration/profession help.
Ek mentioned that for the corporate’s subsequent section, “being lean is not just an option but a necessity.” Final month, Spotify introduced a revamped royalty mannequin, which is meant to offer “working artists” a much bigger minimize, whereas decreasing fraudulent streams.
Spotify has seen constant development because it launch and now counts 574 million month-to-month energetic customers, up 26 p.c over the identical interval final 12 months. The corporate has all the time struggled to make a revenue, although with its final quarter being a uncommon exception. Ek promised extra details about what the adjustments will imply “in the days and weeks ahead” — however all that will probably be chilly consolation to workers all of a sudden discovering themselves unemployed simply earlier than the vacations.