Music streaming service Spotify will cut about 17% of its global workforce, becoming the latest big tech company feel the bite of the economy.
The figure represents around 1,500 of the Sweden-based streamer’s 9,000 staff, as is the result of economic growth slowing “dramatically,” according to Spotify CEO Daniel Ek. Back in January, Spotify said it would cut staff by 6% and announced a hiring slowdown in October, but this move to reduce costs goes much deeper.
However, Ek claimed today’s decision was “not a step back” but “a strategic reorientation.” The New York Stock Exchange-listed company expects to incur costs of at least €35M ($38M) on severance charges.
Ek is not the first chief exec of his kind to choose deep cuts in recent times. Alphabet, Amazon, Microsoft, Meta, X and Roku have all enacted tough redundancy programs reorganize their their businesses for various reasons, most relating to the media environment that’s developed after the pandemic, during which tech and digital media companies invested huge sums to capitalize on increased usage of their products.
“Over the last two years, we’ve put significant emphasis on building Spotify into a truly great and sustainable business – one designed to achieve our goal of being the world’s leading audio company and one that will consistently drive profitability and growth into the future,” wrote Ek.
“While we’ve made worthy strides, as I’ve shared many times, we still have work to do. Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities.”
Despite the challenges facing digital media companies, the news will hit staff hard, as the company’s third quarter financial results revealed it had stemmed operating losses from Q2 to post a small but notable €32M ($34.8M) profit and boosted revenues 11% year-on-year.
In a blog post company update, Ek addressed the timing of the cuts. “I realize that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance,” he wrote.
“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.”
Ek noted Spotify had take “advantage of the opportunity presented by lower-cost capital” in 2020 and 2021 and “significantly” upped investment in staff, ‘content enhancement,’ marketing and new verticals. While these generally helped Spotify grow, the company was now in “a very different environment.” Despite efforts to “reduce costs this past year, our cost structure for where we need to be is still too big.”
Most Spotify staff impacted by the cuts will receive approximately five months’ severance pay, including healthcare, and be eligible for two months’ outplacement services.
Ek wrote that Spotify had been “more productive but less efficient” in 2022 and 2023, with “too many people dedicated to supporting work and even doing work around the work rather than contributing to opportunities with real impact.” Focus would now turn to “delivering for our key stakeholders – creators and consumers.
“In two words, we have to become relentlessly resourceful.”
He later wrote: “This kind of resourcefulness transcends the basic definition – it’s about preparing for our next phase, where being lean is not just an option but a necessity.
“Embracing this leaner structure will also allow us to invest our profits more strategically back into the business. With a more targeted approach, every investment and initiative becomes more impactful, offering greater opportunities for success.
“This is not a step back; it’s a strategic reorientation. We’re still committed to investing and making bold bets, but now, with a more focused approach, ensuring Spotify’s continued profitability and ability to innovate. Lean doesn’t mean small ambitions; it means smarter, more impactful paths to achieve them.”
He admitted reducing staff but such a degree would “change the way we work,” and added he would “share much more about what this will mean in the days and weeks ahead.”
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Source: DLine
