Spotify plans significant workforce cutback by 1,500 employees in cost-optimisation effort

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4th December 2023 – (Stockholm) Music streaming behemoth Spotify announced on Monday, 4th December, that it plans to reduce its workforce by approximately 1,500 employees, marking a 17% reduction in its total headcount. This decision comes as part of a strategic initiative to curb costs, following earlier layoffs of 600 staff members in January and an additional 200 in June.

Despite posting an uncommon quarterly operating profit of €32 million (US$34.7 million) in October, a notable improvement over a loss of €228 million during the same period the previous year, Spotify has decided to proceed with the layoffs. This profit was supported by a 26% surge in active users during the third quarter. The company had projected its monthly listener count to peak at 601 million in the holiday quarter.

In a letter to employees viewed by AFP, CEO Daniel Ek acknowledged the surprise that this substantial cutback might elicit, especially in light of the company’s recent favourable earnings report. Ek explained that the company had expanded its hiring in 2020 and 2021 due to the lower cost of capital, which resulted in increased output. However, he stated that Spotify’s current cost structure remains too large for its needs, given the changing business environment.

Ek indicated that smaller reductions had been considered for 2024 and 2025. However, in view of the significant gap between the company’s financial targets and its current operational costs, he concluded that a substantial cost-right-sizing action was the best path towards achieving its objectives.

Spotify’s decision mirrors a growing trend among tech companies, including Amazon and Microsoft-owned LinkedIn, which have also recently announced workforce reductions.

Since its inception, Spotify has made substantial investments to fuel growth, expanding into new markets and adding exclusive content such as podcasts. The company has funnelled over US$1 billion into podcasts alone. From a modest 3,000 staff members in 2017, the company’s workforce had swelled to approximately 9,800 by the end of 2022.