Spotify Lays off 17 Percent of Workforce in Third Layoff Round of the Year
Spotify, the music streaming platform, has announced that 1,500 employees, or 17 percent of its workforce, will be laid off on Monday to decrease costs.
The layoffs come after the streaming giant laid off 600 in January and 200 more in June.
“The Spotify of tomorrow must be defined by being relentlessly resourceful in how we operate, innovate, and tackle problems,” Chief Executive Daniel Ek said in a 1,000-word letter to staff. “Being lean is not just an option but a necessity.”
As reported by the Wall Street Journal, EK said that Spotify is spending too much, even amid efforts to reduce costs. He noted the music company has also experienced slower economic growth in addition to interest-rate increases, making it more expensive to borrow.
“By most metrics, we were more productive but less efficient. We need to be both,” Ek said.
On Monday, Spotify shares experienced an 8 percent increase to $195.42 in afternoon trading. The stock is up 150 percent in 2023 but remains down about 46 percent from February 2021, a record-breaking high.
In light of the layoffs, Spotify is expected to absorb 145 million euros in charges, equal to about $157 million, during the year’s final quarter.
According to Reuters, the music streaming company also reported a fourth-quarter operating loss between 93 million euros and 108 million euros compared to its earlier forecast of an operating profit of 37 million euros.
Ek and Chief Financial Officer Paul Vogel said the company seeks to reach profitability by 2024. Last year, during Spotify’s first investor day since going public, Ek shared that he wants Spotify to be the largest audio company in the world and hopes to generate $100 billion in revenue by the year 2030.
On Monday, Ek noted that the proportion of the layoffs will seem large due to the recent positive earnings reports and its performance.
“By most metrics, we were more productive but less efficient. We need to be both,” Ek said.
Following the layoffs, employees will receive about five months of severance pay, vacation pay, and healthcare coverage for the severance period.
“We debated making smaller reductions throughout 2024 and 2025,” Ek said. “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.”
Photo Courtesy: ©Pexels/ Amar Preciado
Milton Quintanilla is a freelance writer and content creator. He is a contributing writer for Christian Headlines and the host of the For Your Soul Podcast, a podcast devoted to sound doctrine and biblical truth. He holds a Masters of Divinity from Alliance Theological Seminary.
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