Music streaming giant Spotify has revealed plans to lay off approximately 1,500 employees, constituting 17% of its workforce, as part of a cost-cutting strategy. This move comes after previous layoffs of 600 staff members in January and an additional 200 in June.
In a letter addressed to Spotify employees, CEO Daniel Ek explained that the decision to expand the workforce in 2020 and 2021 was driven by a lower cost of capital. While the company experienced increased output, Ek noted that it was often correlated with having more resources. He emphasized the need for Spotify to be both productive and efficient.
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Spotify invested over a billion dollars to enhance its podcast business, securing partnerships with high-profile figures such as Kim Kardashian, Prince Harry, and Meghan Markle. The company has also aimed to achieve a billion users by 2030, currently boasting 601 million users, up from 345 million at the end of 2020.
Despite a profitable third quarter, driven by price hikes in streaming services and subscriber growth globally, Spotify acknowledges the importance of operational efficiency. CEO Ek highlighted that despite positive metrics, the company needs to align its financial goals with current operational costs.
Affected employees will receive severance pay, vacation pay, and healthcare coverage for a period of about five months. The company will also provide immigration support for employees whose immigration status is linked to their employment.
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Ek explained that while alternative strategies were considered, a significant reduction was deemed the most effective way to align operational costs with financial goals and ensure the company's long-term success. The company will initiate the process of informing affected employees on Monday.
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