Spotify’s CEO, Daniel Ek, has announced a significant workforce reduction, with 17 percent of employees set to be laid off as part of a cost-cutting strategy. The decision, affecting over 1,500 individuals out of a total headcount of 9,241, is attributed to the challenges posed by slowing economic growth and escalating costs.
In a memo to the staff, Ek emphasized the necessity of creating a more streamlined and resourceful company, pointing out that certain roles were focused on supporting tasks rather than contributing to impactful opportunities. This marks Spotify’s third major round of layoffs in the current year, following earlier reductions in January (6 percent of staff) and June (200 roles in the podcast division).
The motivation behind these measures is not only cost reduction but also a response to the substantial increase in Spotify’s headcount during the pandemic, nearly doubling in the past three years. Ek defended the prior expansion but acknowledged the need to adapt to the current business environment.
Affected employees will receive approximately five months of severance pay, with the company continuing to cover their healthcare during this period. This move comes as part of Spotify’s broader strategy to enhance profitability, including recent price hikes on various subscription plans across multiple markets.
While historically prioritizing growth over immediate profits, Spotify is now under increasing pressure from investors to achieve profitability. Ek previously outlined the goal of making the company profitable by 2024, and despite a recent quarterly profit, the company reported significant losses of €462 million (around $502 million) in the first nine months of the current year.