Spotify reduces its workforce by 6%.
The audio company, led by CEO Daniel Ek and employing nearly 9800 individuals, is reducing its staff size by 6%, with Ek citing: “As we evolve and grow as a business, so must our way of working while still staying true to our core values.”
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On Monday, Spotify announced a devastating cost-saving measure that would result in 600 layoffs – about 6% of its workforce. This announcement comes at a difficult time for many tech companies who are struggling to make ends meet amidst the current economic climate.
In connection with the layoffs, the company anticipates severance costs to range from $38 million to $49 million.
In a recent blog post, CEO Daniel Ek announced extensive layoffs that will have a more far-reaching impact than their previous round in October. These cuts impacted staff working on podcast shows from Gimlet and Parcast studios which had been canceled.
As part of its restructuring, Spotify’s Chief Content and Advertising Officer, Dawn Ostroff, will leave the business. This is one of the most prominent departures within Spotify since its establishment. Ostroff will take a senior advisory position at Spotify to facilitate the ongoing transition.
Furthering administrative changes, the company elevates Alex Norström and Gustav Söderström to co-presidents. This way, Norström will be in charge of all content matters while leading by example.
“As we evolve and grow as a business, so must our way of working while still staying true to our core values,” Ek wrote in his blog post. “To offer some perspective on why we are making this decision, in 2022, the growth of Spotify’s operating expenses outpaced our revenue growth by two times. That would have been unsustainable long-term in any climate, but with a challenging macro environment, it would be even more difficult to close the gap.”
He added: “Personally, these changes will allow me to get back to the part where I do my best work—spending more time working on the future of Spotify — and I can’t wait to share more about all the things we have coming.”
The CEO also addressed Ostroff’s exit. “As a part of this change, Dawn Ostroff has decided to depart Spotify,” he wrote. “Dawn has made a tremendous mark not only on Spotify but on the audio industry overall. Because of her efforts, Spotify grew our podcast content by 40 times, drove significant innovation in the medium, and became the leading music and podcast service in many markets.”
Last June, Spotify CEO Ek announced to employees that the company would decrease hiring growth by 25 percent to reduce personnel expenditures and “be a bit more prudent with the absolute level of new hires over the next few quarters.” Paul Vogel, the chief financial officer of the organization, also made a note of “increasing uncertainty regarding the global economy” at Spotify’s investor day in June as a reason for “evaluating [Spotify’s] head-count growth in the near term.”
Spotify has become the latest tech firm to announce large-scale layoffs, joining a growing list of companies in this challenging economy.
Google’s parent company Alphabet, Amazon, Facebook/Instagram Meta Platforms, and Microsoft have all reported recent layoffs. Last week Alphabet announced it would be slicing 12,000 roles, while Amazon revealed it would downsize by 18,0000 before this month’s end. Microsoft then followed suit with a further 10k redundancies just this week!
In 2021, Meta proclaimed the elimination of 11,000 staff positions. Companies like Snap, Twitter, and Netflix followed suit by making extensive terminations this year.
By the conclusion of Q3, Spotify boasted around 9,800 employees and 3.04 billion euros in revenue. Moreover, they welcomed an additional 195 million paid subscribers throughout that quarter. CEO Daniel Ek proclaimed that the economic downturn had not impacted their business despite being “more selective with overall spending.”
Mark your calendar! Spotify will release its fourth-quarter earnings report on January 31 before the market opening.
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