Spotify Plans to Cut 17 Percent of its Workforce

Spotify plans to reduce its workforce by approximately 17 percent, resulting in the layoffs of at least 1,500 people. This marks the latest in a series of workforce reductions by the company in 2023.

Spotify Plans to Cut 17 Percent of its Workforce
Spotify Plans to Cut 17 Percent of its Workforce

Shortly after Spotify’s major promotion with its year-end Wrapped, founder and CEO Daniel Ek informed employees and the public of “organizational changes” in a blog post on Monday. He emphasized that “being lean is not just an option but a necessity.

Spotify Plans to Cut 17 Percent of its Workforce, Affecting at Least 1,500 People

Ek stated that, to align Spotify with our future goals and ensure readiness for upcoming challenges, he has made the tough decision to cut our total headcount by around 17 percent across the company.

Later in the post, he added that the choice to downsize our team is a challenging yet vital move towards building a more robust and efficient Spotify for the future. He emphasized that it also underscores the necessity of changing how we work.

Spotify’s layoffs are noteworthy, considering they occurred just a month after the company’s positive Q3 earnings report. In that report, Spotify revealed a year-on-year total revenue growth of 11 percent, reaching €3.4 billion—surpassing guidance. The gross margin exceeded expectations at 26.4 percent, marking a return to profitability, with an operating income of €32 million for the quarter. In simple terms, the company is in a strong financial position.

Navigating Spotify’s Transformative Changes

Ek acknowledged that, for many, a reduction of this magnitude might be surprisingly significant, especially given the recent positive earnings report and performance. He mentioned ongoing debates about making smaller reductions throughout 2024 and 2025. However, considering the disparity between their financial goal state and current operational costs, he concluded that taking substantial action to rightsize their costs was the best option to achieve their objectives.

Spotify’s substantial layoffs align with the broader trend in Big Tech, following similar actions at Meta, Amazon, Microsoft, PayPal, Twitter/X, and others. In 2023 alone, Spotify has undergone multiple cuts, including a two percent reduction in its workforce in June, impacting approximately 200 employees, primarily in podcasting.

In the post, Ek highlighted Spotify’s team growth in 2020 and 2021, noting that they seized the chance with lower-cost capital. However, he expressed concern that the company currently has “too many people dedicated to supporting work and even doing work around the work rather than contributing to opportunities with real impact.” He emphasized the need for more people to be focused on delivering for their key stakeholders—creators and consumers.

Ek informed employees that those affected would receive a calendar invite from HR for a meeting, and all these meetings will occur before the end of Tuesday. Katarina Berg, Spotify’s global HR lead and head of the company’s Global Workplace Services and Strategy Operations teams, will “provide more detail on the specifics.

In the post, Ek committed to providing baseline severance pay based on tenure and notice period requirements, ensuring “the average employee receives approximately five months of severance.” Additionally, employees will receive pay-outs for unused vacation time, and healthcare coverage will be maintained during the severance period. For Spotify employees facing visa or immigration status challenges due to the layoffs, Ek mentioned that “HRBPs are collaborating with each impacted individual in coordination with our mobility team.” Those eligible for career support will receive two months of outplacement services.

Ek invites employees to “join me on Wednesday for Unplugged to discuss how we move forward together.” During this meeting, the company will “share much more about what this will mean in the days and weeks ahead.

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