Spotify is cutting 1,500 jobs, or 17% of its workforce to reduce costs
Spotify, the popular music streaming platform, has announced a significant move to cut approximately 1,500 jobs, which accounts for about 17% of its workforce. This decision comes after the company had already laid off 600 employees in January and an additional 200 in June.
Following this announcement, Spotify’s U.S.-listed shares experienced an impressive 11% surge, reaching levels close to their two-year high during early trading.
The decision to reduce the workforce reflects a trend in the tech industry, with other companies like Amazon and Microsoft-owned LinkedIn also making similar announcements about job cuts.
In a letter to the employees, Spotify CEO Daniel Ek explained that the company had hired more extensively in 2020 and 2021 due to the lower cost of capital.
Although the company’s output increased during this period, Ek acknowledged that much of it was attributed to having more resources.
As a consequence of the layoffs, Spotify anticipates incurring charges ranging from 130 million euros to 145 million euros in the fourth quarter.
The majority of the cash component of these charges will be recorded in the first and second fiscal quarters of 2024. This will contribute to a shift in the company’s financial outlook, with a fourth-quarter operating loss now expected between 93 million euros and 108 million euros, in contrast to the previous forecast of an operating profit of 37 million euros.
Despite Spotify’s recent positive earnings report and its profitable third quarter, Ek emphasized the need for both productivity and efficiency. He noted,
“By most metrics, we were more productive but less efficient. We need to be both.”
The company had previously invested over a billion dollars in expanding its podcast business, securing partnerships with celebrities such as Kim Kardashian, Prince Harry, and Meghan Markle and expanding its market presence globally, with the goal of reaching a billion users by 2030.
Affected employees were informed of the layoffs and they will receive approximately five months of severance pay, vacation pay and healthcare coverage for the severance period.
Ek mentioned that the decision to make substantial job cuts was made in consideration of the gap between the company’s financial goals and its current operational costs.
He stated, “We debated making smaller reductions throughout 2024 and 2025. Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives.”
