In a third round of layoffs this year, Spotify will lay off some 1,500 workers to slash expenses, CEO Daniel Ek said Monday, announcing a “significant” change in the company’s approach.
“Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities,” Ek wrote in a letter to staff posted to the company’s website.
After a big hiring and spending spree helped the firm amass tens of millions of customers, but failed to turn a consistent profit, Spotify is making changes to become more efficient and return to its startup beginnings.
According to Ek, the company had discussed implementing smaller layoffs in 2025 and the following year. However, he continued, “I determined that a significant action to right-size our costs was the best option to accomplish our objectives, given the gap between our financial goal state and our current operational costs.”
“To be blunt, many smart, talented and hard-working people will be departing us.”
Before the end of the day on Tuesday, Ek promised to hold one-on-one talks with the affected employees. Employees will often receive severance pay for five months.
Along with a number of tech businesses, such as Microsoft (MSFT) and Amazon (AMZN), Spotify (SPOT), which employs over 9,000 people, lay off over 500 workers in January as the global economy slowed. Additionally, Spotify laid off 200 workers from its podcasting division in June.
During the Covid-19 pandemic, major IT companies hired a lot of people to meet the increased demand from businesses and homes for services like videoconferencing and online shopping. However, since then, rising interest rates and inflation have put pressure on consumer spending, reduced the availability of loan and equity finance, and increased its cost, which has caused many of them to announce significant job losses.
According to Ek, Spotify has experienced “robust growth” in the last 12 months, but it has also grown “less efficient” and has abandoned the “resourcefulness” that characterised its early years as a software start-up.
He went on to say that too many people are committed to supporting labour rather than delivering for content creators and customers.
Even though it added 6 million users between June and September, which is 2 million more than the firm had anticipated, Spotify managed to turn a profit during that time of only €32 million ($34.8 million). In comparison, the same quarter last year saw a loss of €228 million ($248 million). In total, the corporation has 226 million subscribers.
“We still have a ways to go before we are both productive and efficient… we have to become relentlessly resourceful,” Ek said.
“This is not a step back; it’s a strategic reorientation… A reduction of this size will make it necessary to change the way we work, and we will share much more about what this will mean in the days and weeks ahead.”
