The latest technological layoffs will see 6% of Spotify’s staff let go.

By Justin Jones On Jan 23, 2023

The latest technological layoffs will see 6% of Spotify’s staff let go. Spotify stated Monday that it would be laying off 6% of its global personnel in response to the dismal economic climate, which has caused both customers and marketers to tighten their belts.

Out of Spotify’s overall workforce of 9,800, roughly 600 workers will be affected by the layoffs. According to its LinkedIn page, the corporation has 5,400 American employees and 1,900 Swedish ones.

After the company announced the cost-cutting initiatives on Monday, Spotify’s stock price increased by more than 3 percent.

The layoffs were announced in a message addressed to Spotify employees on Monday. The Swedish company is publicly traded on the New York Stock Exchange.

Daniel Ek, CEO of Spotify, published a message that was made public on the company’s website. He said he would have private meetings with affected staff over several hours.

To paraphrase Ek, “Like many other leaders, I wanted to sustain the strong tailwinds from the epidemic and assumed that our vast global business and lesser risk to the impact of a slowdown in ads would cushion us.”

“Looking back, my investment plans were overly forward-looking relative to our revenue growth. That’s why the corporation is slashing 6% of its workforce today.

In a memo to staff, Ek stated, “I assume full ownership for the moves that lead us here today.”

According to Ek, terminated employees would receive a median severance of five months and ongoing health benefits. Employees whose immigration status is tied to their job will also have access to immigration support.

The business said in a filing with the Securities and Exchange Commission that there would be severance-related charges between $38 million (€35 million) and $45 million.

The chief of content at Spotify, Dawn Ostroff, is also departing the company. In 2018, Ostroff, formerly the head of Conde Nast Entertainment, joined Spotify to assist in expanding the company’s an advertising and podcasting divisions.

During her time at Spotify, Ostroff signed Higher Ground Productions, the production business of former President Barack Obama and First Lady Michelle Obama, to have the Obamas create original podcasts for Spotify. She spearheaded the negotiations for exclusive podcasting rights with Kim Kardashian, Prince Harry, and Meghan Markle, and she was also instrumental in acquiring those rights from Joe Rogan.

Because of her, “Spotify became the leading music and podcast provider in several markets,” Ek boasted in a statement released Monday.

As of this past Friday, Google had joined the ranks of other prominent tech companies in announcing layoffs, this time affecting 12,000 workers. However, Microsoft and Amazon have also reported reducing their workforces.

In 2022, IT companies were forced to face the music when rising interest rates from the Federal Reserve discouraged investors from purchasing company stock.

In October, Spotify announced that its third-quarter revenue had increased by 21% to 3 billion euros, driven by an increase in paying subscribers, while ad-supported revenue had increased by 19% to 385 million euros due to its podcasting effort. The company stated that the increased loss was due to the increased cost of maintaining a larger workforce and increased advertising expenses related to business expansion.

See here for Ek’s full email to the Spotify team:

Team,

According to our band manifesto, the only constant changes. I keep stressing that speed is the most secure business tactic you can employ. However, velocity is insufficient in and of itself. We need to maximize productivity as well. These two factors, taken together, are what will ensure our continued success. In light of this, I want to announce some important information today.

Even though we have achieved tremendous strides in speed in recent years, we have yet to put nearly as much effort into enhancing efficiency. Time is still wasted trying to synchronize varying tactics. As the economy continues to struggle, efficiency becomes even more crucial. Therefore, I have chosen to reorganize our company to increase productivity, reduce waste, and quicken decision-making.

Starting at the top, we are making serious adjustments to how things have always been done. To that end, I’ve appointed Gustav as Chief Product Officer to oversee all engineering and product development and Alex as Chief Commercial Officer to oversee all business operations. Gustav and Alex, who have been with Spotify for a long time and have done tremendous work, will lead these teams as co-presidents, effectively helping me manage the company daily. In the coming days, they’ll provide more details on what this entails, but rest assured that I have complete faith in our ability to take Spotify to new heights under their direction.

I’m looking forward to sharing more about all the exciting things we have planned for Spotify in the future now that I’ll have more time to focus on the parts of my job where I excel.

Dawn Ostroff has left Spotify as a result of these alterations. Dawn has left an indelible mark on the music business, not just on Spotify. She was instrumental in helping Spotify become the market leader in many countries and multiply its podcast content by 40. These audio-focused initiatives benefited musicians and podcasters and sparked fresh enthusiasm for Spotify’s audio advertising possibilities.

Spotify’s advertising revenue has increased to €1.5 billion as a direct result of her efforts, which led to innovations in both the ad structure and delivery. We are eternally thankful for the crucial part she performed and wished her the best. Dawn will soon be taking on the job of senior advisor to ease the process of this change. After this point, Alex will be the main point of contact for any updates regarding content, advertising, or licensing.

The requirement for increased productivity

Next, I have some news from the second update. As part of this initiative, and to more closely align our costs, we have made the tough but necessary choice to cut the number of staff.

All affected employees will be contacted individually within the next several hours. While I am confident this is the best option for Spotify, many of you may see this as a departure from our usual ethos, given our emphasis on expansion in the past. However, how we do business must change as we expand, but we must always maintain our principles.

To put this decision in context, in 2022, Spotify’s OPEX grew at a rate that was twice as fast as our revenue. Long-term, that couldn’t work in any climate, but it’s impossible to make the difference in this terrible macro context. We’ve made a concerted effort over the past few months to reduce expenses, as you know, but we need more. This may be the best option for Spotify in the long run, but that makes it easier, especially considering how our coworkers have helped us get here.

Like many other CEOs, I had high hopes that our global reach and reduced exposure to the effects of a slowdown in advertising would protect us from the epidemic’s impact. I should have known better than to try to outpace our sales growth with my investments. Thus, we will immediately be laying off around 6% of the company’s workforce. I am solely responsible for everything that has happened up to this point.

My current priority is guaranteeing all employees a smooth and equitable exit process. Katarina will go into greater depth about the specifics of our commitment to these talented bandmates, but the following applies to everyone who will be affected:

As a starting point, we will provide all employees with a severance package of about five months. Time in service and legal notice requirements at the employee’s location will be used to determine this.

Paid time off Any employee who leaves the company will get a payment for all vacation days they have earned but have not utilized.

We will continue to pay for employees’ health insurance during the severance.

HRBPs are providing help for employees whose immigration status is tied to their job in coordination with our mobility team.

Help for Your Job Search: Outplacement Services Available to Everyone for Two Months!

The Next Steps

Our company is doing well, and we were able to meet practically all of our goals for 2022. However, 2023 ushers in a new era. We’ll be better prepared for the future by making these difficult choices. Nothing has shifted in our will to accomplish our lofty objectives.

We’ve come a long way, but there’s still a long way to go until we have a complete platform for creators of all skill levels. Suppose we want to become the creator community’s first choice. In that case, we need to develop better tools and technologies and think of innovative methods to assist creators in building their fan bases, advancing their careers, and earning money from their work.

I am confident that 2023 will be a year where consumers and creators will see a steady stream of innovations, unlike anything we have introduced in the last several years after looking at our roadmap, the changes we are making, and what we have planned to share at our upcoming Stream On event. I plan to reveal further details on these fascinating breakthroughs in the following weeks.

Last but not least, I invite you to come to Unplugged with me tomorrow.

All of you leaving have my deepest gratitude for your contributions to Spotify and my best wishes for the future.