Spotify, the popular music-streaming platform, is set to reduce its workforce by 17%, equivalent to approximately 1,500 employees.
CEO Daniel Ek shared this decision on Monday, unveiling a substantial shift in the company’s strategy.
In a letter posted on the company’s website, Ek cited a significant economic slowdown and increased capital expenses as the driving forces behind the decision.
He acknowledged the impact of these economic realities on Spotify, prompting a need for a more streamlined and efficient operation.
Ek expressed the intention to return Spotify to its entrepreneurial origins, emphasizing efficiency over the scale that was achieved through extensive hiring and spending.
Despite the company’s impressive growth and a surge in subscribers, sustained profitability remained elusive.
The CEO deliberated over the possibility of incremental job cuts in the coming years but concluded that substantial action was necessary to align operational costs with financial goals.
Ek stated candidly, “To be blunt, many smart, talented, and hard-working people will be departing us.”
Individual meetings with affected staff are scheduled before the close of the following day, with an average severance pay of approximately five months.
This move comes as part of Spotify’s broader efforts to address financial misalignment.
Spotify, boasting a workforce of over 9,000 employees, previously laid off more than 500 workers in January and another 200 in June.
These measures mirror a trend observed across various tech giants, such as Microsoft and Amazon, responding to the economic slowdown triggered by the global pandemic.
While Spotify experienced robust growth, Ek highlighted a departure from the resourcefulness that characterized its early startup days.
He stressed that the company had become less efficient, with too many resources allocated to support roles rather than focusing on delivering value to content creators and consumers.
Despite adding six million subscribers between June and September, exceeding projections, Spotify reported a modest profit of €32 million ($34.8 million).
This contrasted with a loss of €228 million ($248 million) during the same period the previous year.
The company currently boasts a total of 226 million subscribers.
Ek clarified that this workforce reduction is not a setback but rather a strategic reorientation.
It signifies a necessary shift in how the company operates, aiming to become more productive and efficient.
More details about these changes will be shared in the coming days and weeks, as Spotify embarks on this strategic transformation.
