In a pre-holiday shocker, Spotify has decided to lay off 17% of its workforce across the company, CEO Daniel Ek announced in a press release. Company press release. The cuts are being made because of what Ek called “the challenges ahead” and chose to make them immediately rather than making smaller cuts over time. He added that affected employees will be notified later today.
“I realize that for many, a reduction of this size would be surprisingly large given the recent positive earnings report and our performance,” Ek wrote. “We have discussed making smaller reductions throughout 2024 and 2025. However, given the gap between our financial target status and our current operating costs, I have decided that taking substantive action to right-size our costs is the best option to achieve our goals. I am convinced that this is the right action for our company, “I also understand that it will be very painful for our team.”
Ek noted that the company expanded significantly in 2020 and 2021 due to a lower cost of capital. “Overall, these investments have been successful, contributing to Spotify’s increased production and strong growth for the platform over the past year,” he said. Despite the cuts made last year — the company laid off 6 percent of its workforce in early 2023 and another 2 percent in May — “our cost structure relative to where we need to be is still very significant,” Eck said.
After these rounds of layoffs, Spotify had about 9,000 employees, so the latest cuts will see about 1,500 employees lose their jobs (4,300 of those jobs were in the US as of 2022). To soften the blow, Ek said Spotify will pay an average of five months’ severance pay, cover healthcare during that period and provide immigration/employment support.
For the company’s next phase, “being agile is not just an option but a necessity,” Ek said. Last month, Spotify announced a revamped ownership model, which will supposedly give “working artists” a greater stake, while reducing fraudulent streams.
Spotify has seen steady growth since its launch, with monthly active users reaching 574 million, an increase of 26 percent compared to the same period last year. The company has always struggled to turn a profit, though The last quarter Being a rare exception. Ek promised more information about what the changes will mean “in the coming days and weeks” — but it will all come as cold comfort to employees who suddenly find themselves out of work just before the holiday.
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