Spotify, the music-streaming titan, is reducing its staff by 17%, confirmed Chief Executive Daniel Ek. He explained that these staff reductions are a strategic move by the company to resize Spotify appropriately and harmonise with its future objectives. The CEO highlighted that economic growth has notably decelerated and capital has become pricier, influencing this decision.
“To align Spotify with our future goals and ensure we are right-sized for the challenges ahead, I have made the difficult decision to reduce our total headcount by approximately 17% across the company. I recognize this will impact a number of individuals who have made valuable contributions. To be blunt, many smart, talented and hard-working people will be departing us,” said Ek.
Around 1,500 employees, roughly 17% of its workforce, are anticipated to be affected. Spotify had previously laid off 600 employees in January, followed by an additional 200 in June. Daniel Ek, in a communication to the staff, mentioned that they should expect a calendar invitation from HR within two hours for a one-on-one discussion. These individual meetings are scheduled to take place by the end of Tuesday.
Spotify will provide severance pay for a duration of five months, following the local notice period requirement. Additionally, accrued and unused vacation days will be compensated to those affected by the layoffs. Healthcare coverage will persist during the severance period, ensuring continuity for impacted employees.
Furthermore, all individuals affected will have access to outplacement services for a span of two months. Expressing gratitude, Spotify's CEO acknowledged the departing employees for their commitment and hard work.
"Thank you for sharing your talents with us. Your contributions have significantly impacted more than half a billion people worldwide, including countless artists, creators, and authors," Ek expressed.
Despite the recent positive earnings and overall performance of Spotify, Ek highlighted a disparity between their financial goals and current operational costs. He indicated that taking substantial measures to realign their expenses was necessary to achieve their objectives.
"Though I am confident this action is necessary for our company, I also recognise the significant challenge it poses for our team," Ek acknowledged.
The Spotify CEO highlighted the company's past strategies, mentioning that in 2020 and 2021, they capitalised on lower-cost capital by investing in team expansion, content enrichment, marketing, and new ventures. However, the current landscape presents a notably different scenario for the company.
Reflecting on the years 2022 and 2023, which Ek described as "impressive," he noted that although Spotify has been more productive during this time, it has been less efficient. He emphasised the importance of achieving both productivity and efficiency, acknowledging the progress made in enhancing efficiency in 2023 but also recognising the need for further improvement.
Ek communicated to Spotify employees that the day holds significance and difficulty for the company. He reaffirmed his steadfast commitment to the company's mission and unwavering belief in its capacity to achieve success. Ek extended an invitation to join him on Wednesday for "Unplugged" to discuss the way forward together.
He acknowledged that a reduction of this magnitude would necessitate changes in the company's work approach, promising to provide more comprehensive details about these changes in the coming days and weeks. He concluded by expressing his anticipation for 2024, emphasizing the company's commitment to strengthening Spotify even further in the coming year.