Daniel Ek, the CEO of the music streaming service Spotify, declared that the company is letting go 17% of its staff.In a message to the staff, Ek expressed that Spotify put in too much money during 2020 and 2021 and had to "rightsize" the expenses to fit the new fiscal reality.Spotify declared a 65 million euros ($70.7 million) profit in the third quarter, citing less spending on marketing and personnel.
Spotify's CEO, Daniel Ek, announced on Monday that the music streaming service is laying off 17% of its workforce. This is a dramatic move to reduce costs and adjust to a decrease in growth. Ek stated in an email to staff that Spotify had taken on too many employees in 2020 and 2021, when capital availability was high and tech companies were investing much money into team expansion. The cuts amount to about 1,500 jobs, according to a source from CNBC. Official numbers were not disclosed by a Spotify spokesperson. Markets were up 2% in U.S. premarket trading. Ek explained that the goal is to build Spotify into a profitable and continuously growing business. Economic growth has slowed, and access to capital has become more expensive. Spotify is not exempt from these realities.
After reporting a 65 million euro ($70.7 million) profit in the third quarter, citing lower spending on marketing and personnel, Spotify raised the prices of its subscription plans and has been expanding into podcasts and audio books. Recently, the company has had to cut back on costs amid higher interest rates and a worsening macroeconomic landscape. They had already downsized by 6% or about 600 employees at the beginning of the year, and now, they are reducing their total headcount by 17%, which is an equivalent to around 200 roles. CEO Daniel Ek's full memo to staff sent earlier today explained that it is necessary to change the way they work in order to meet their goals and remain profitable. He described these cuts as 'a difficult but important step towards forging a stronger, more efficient Spotify for the future'. Employees impacted by these changes will receive an invitation from HR for a one-on-one conversation and if accepted, they will get a baseline of about five months of severance pay, health care coverage, and a few other benefits. Ek reassured that they will continue to invest in their team and make bold bets, but a more targeted approach is needed in order to ensure their success. Finally, he urged his employees to join him on Wednesday for Unplugged to discuss how they will move forward.
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