The S audio platformpotify announced today a reduction in its workforce of “approximately 17%,” or approx 1.500 people. This is the third staff cut announced by the music streaming giant after those in January (6%) and June (2%). Overall, therefore, in 2023 Spotify laid off 25% of its employees.
Spotify fires 1.500 people
The purpose of the layoffs is to reduce costs in a context of "spectacular" slowdown in economic growth, writes the France Presse news agency which has seen the letter from the Spotify General Director, Daniel Ek, to the staff. The CEO will speak publicly about the cuts on Wednesday in a session of the company's traditional “Unplugged” event.
The decision surprised the market a lot, especially given the excellent numbers recorded by Spotify in the third quarter. In fact, in the months of July-September, revenues and premium subscribers (+26%) grew above expectations, allowing the company to achieve an operating profit of 32 million euros and a net profit of 65 million.
“I am aware that for many a reduction of this magnitude may seem surprising, given the recent positive data on profits and our performance”, admits Ek who then explains that the layoffs should allow “align Spotify with our future goals and to ensure we are adequately sized for the challenges ahead.”
“We discussed possible minor reductions during 2024 and 2025 – added the top manager – However, considering the gap between our financial target and our current operating costs, I decided that substantial action to reduce our costs was the best option to achieve our goals” even if it is an “incredibly painful cut for our team”.
CEO Ek: “We want to become the world's leading audio company”
“Over the past two years, we have placed significant emphasis on Spotify transformation into a truly exceptional and sustainable business, designed to achieve our goal of becoming the world's leading audio company and that will consistently drive profitability and growth into the future – wrote CEO Daniel Ek in an email to employees, then published on the site – Although we have made great strides, as I have said many times, we still have work to do. Economic growth has slowed dramatically and capital has become more expensive. Spotify is no exception to these realities."
Ek also added that “embracing this leaner structure will also allow us to reinvest our profits more strategically into the business. With a more targeted approach, each investment and initiative becomes more impactful, offering greater opportunities for success. This is not a step backwards; And a strategic reorientation".
A Wall Street, Spotify shares gained 1% in the pre-market, after losing 2,39% in the last session last week.
