In a significant cost-cutting move, music streaming giant Spotify has declared its intention to cut 17% of its workforce. CEO Daniel Ek, in a memo to staff, emphasized the necessity to "rightsize" the company's financial situation after an over-hiring phase in 2020 and 2021 when capital was more readily available.
"The Spotify of tomorrow must be defined by being relentlessly resourceful in the ways we operate, innovate, and tackle problems," wrote Ek. "This kind of resourcefulness transcends the basic definition — it's about preparing for our next phase, where being lean is not just an option but a necessity."
This marks the third round of layoffs for Spotify this year, amounting to approximately 1,500 jobs, as reported by a CNBC source. Currently employing around 9,000 people globally across over 40 office locations, the move aligns with broader trends in the tech industry, where tens of thousands of positions have been cut in the last year due to the fading effects of the pandemic-era boon.
Ek acknowledged that the scale of the cuts may seem "surprisingly large" at this time. Spotify reported $34 million in operating income during its third-quarter earnings call, marking its first quarterly profit since 2021. Lower personnel costs, resulting from two earlier rounds of cuts, contributed to the savings.
The company had previously cut 6% of its workforce (about 600 employees) in January and another 2% (roughly 200 roles) in June. Simultaneously, Spotify increased subscription plan prices and set a goal to reach a billion users by 2023, with over 570 million users currently.
Beyond music, Spotify aims to expand into audiobooks and podcasting, despite financial challenges and stiff competition. The company has invested nearly a billion dollars in podcasting studios, exclusive deals, and generative AI for ad creation since 2019. However, profitability remains elusive, and the June layoffs targeted downsizing its podcast division.
As of Monday morning, Spotify's shares were up approximately 5% in premarket trading. Departing employees will receive about five months of severance pay, healthcare coverage, vacation pay, immigration support, and two months' worth of career-search assistance, according to Ek's statement.
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