Spotify founder Daniel Ek has announced job cuts equating to 17% of the audio company’s workforce.
At the end of Q3, Spotify reported its headcount was 9,241 full-time employees globally, which would mean these cuts would affect around 1,571 staff.
Despite a reporting positive earnings results earlier this year, Spotify’s founder and CEO warned the company’s cost base is “still too big” and needs to be cut substantially now rather than in stages over the next two years.
Spotify now in ‘a very different environment’
Ek said in a statement : “I realize that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance. 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. While I am convinced this is the right action for our company, I also understand it will be incredibly painful for our team.”
In its latest Q3 2023 earnings, Spotify surpassed all of its key performance indicator guidance included monthly active users, revenue, gross margin, operating income and free cash flow.
Ek cited factors including dramatically slowed economic growth making capital more expensive, and that in 2022 and 2023 much of the company’s output was linked to having more resources, so it had become more productive but less efficient, when it “needed to be both”.
He explained: “To understand this decision, I think it is important to assess Spotify with a clear, objective lens. In 2020 and 2021, we took advantage of the opportunity presented by lower-cost capital and invested significantly in team expansion, content enhancement, marketing, and new verticals. These investments generally worked, contributing to Spotify’s increased output and the platform’s robust growth this past year.
“However, we now find ourselves in a very different environment. And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big.”
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‘Year of efficiency’ has a ‘painful’ ending
This is the company’s third reorganisation this year.
On 23 January 2023 it announced a 6% reduction of its employee base in an effort to “streamline our organizational structure and reduce our operating costs”.
In the three months to 30 June 2023, it carried out “a strategic realignment” to focus on its podcast operations and “rationalize” its content portfolio.
In its latest financial release, Spotify reported that in the nine months to 30 September, 2023, it recognised charges of €69m made up of employee severance of €60m and contract terminations and other related costs of €9m linked to these two reorganisations.
In the last six months, Spotify has launched an ad analytics platform for podcasts and music on its platform, a programme for small and medium sized businesses to learn about digital audio advertising, an audiobook offering in for Premium users in the UK and Australia.
Spotify was contacted for comment but did not respond in time for publication.
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