Music streaming giant Spotify is undergoing a workforce adjustment, with the elimination of approximately 1,500 jobs, which is about 17% of its total workforce. This marks the third round of layoffs in the current year as the company aims to optimize productivity and operational efficiency.
In a communication to employees on Monday, Spotify’s founder and CEO, Daniel Ek, emphasized the necessity of right-sizing the workforce to address the challenges that lie ahead. Factors such as sluggish economic growth and escalating capital costs were cited as reasons for the decision. Ek explained that the company had taken advantage of lower-cost capital in 2020 and 2021 to make substantial investments in the business.
In the note published on the company’s blog, Ek acknowledged the impact on individuals who have made valuable contributions, stating, “To be blunt, many smart, talented, and hard-working people will be departing us.”
Spotify, with approximately 8,800 employees, will notify those affected later in the day. This wave of layoffs follows a 6% reduction in jobs in June and another round of cuts involving several hundred employees in January.
Despite reporting strong user growth, with a significant increase in monthly active users and paid customers in the most recent quarter, Spotify has faced challenges in specific areas. For example, the growth in North American premium subscribers was modest quarter-over-quarter, and there was a slight year-over-year decline in third-quarter premium average revenue per user (ARPU). The company’s fourth-quarter forecasts indicate ongoing challenges due to geographical and product mix shifts.
Ek acknowledged the perception of the reduction in the workforce as surprisingly large given the recent positive earnings report and performance. He explained that, after considering the gap between the company’s financial goal state and current operational costs, a substantial action to rightsize costs was deemed the best option to achieve objectives.
The move aligns with a global trend of significant layoffs, surpassing 225,000 employees across various industries this year. Economic volatility, higher interest rates, and evolving consumer patterns have driven these workforce adjustments. The tech sector, including companies such as Amazon, Google, Meta, Twitter, and Netflix, has also faced cutbacks.
