Despite Spotify's positive earnings report and performance, around 1,500 people are expected to lose their jobs.
Image Credit: Spotify
Spotify CEO Daniel Ek has recently shared an organizational update with Spotify employees, revealing that the company plans to reduce its total headcount by roughly 17% in the near future, which translates to approximately 1,500 job losses, based on the company's current total headcount of around 9,250 people.
Ek attributed the cuts to decelerating economic growth and escalating costs. Despite the company's favorable recent earnings report, the disparity between its financial objectives and the existing operational expenses is purportedly too substantial. The decision to lay off nearly 1/5 of the company's entire workforce is characterized as the optimal strategy for achieving its financial goals.
According to Ek's memo, employees affected by Spotify's recent layoffs will receive approximately five months of severance pay, during which the company will maintain coverage for their healthcare.
"I realize that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance," commented the CEO. "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."
This marks the third instance of Spotify being affected by the 2023 wave of layoffs. Earlier in January, the company had disclosed its intention to reduce its workforce by 6%, impacting around 600 employees. Following that, in June, another announcement was made, indicating an additional cut of 200 roles from its podcast division.
"The decision to reduce our team size is a hard but crucial step towards forging a stronger, more efficient Spotify for the future. But it also highlights that we need to change how we work," the announcement reads. "In Spotify's early days, our success was hard won. We had limited resources and had to make the most of every asset. Our ingenuity and creativity were what set us apart. As we've grown, we've moved too far away from this core principle of resourcefulness."
Speaking of layoffs, last week, Unity Technologies unveiled its plans to end the agreement with Wētā FX, leading to the termination of 265 positions, constituting approximately 4% of Unity's total global workforce.