Spotify CEO Daniel Ek today announced that the company is laying off 17 percent of employees, which equates to more than 1,000 people. Spotify needs to cut costs in an effort to narrow the gap between its current operational costs and financial goal state.
Over the last two years, we've put significant emphasis on building Spotify into a truly great and sustainable business - one designed to achieve our goal of being the world's leading audio company and one that will consistently drive profitability and growth into the future. While we've made worthy strides, as I've shared many times, we still have work to do. Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities.
This brings me to a decision that will mean a significant step change for our company. To align Spotify with our future goals and ensure we are right-sized for the challenges ahead, I have made the difficult decision to reduce our total headcount by approximately 17% across the company.
According to Ek, Spotify took on too many employees in 2020 and 2021, and while that led to increased output and company growth, it also made Spotify less efficient and increased operating costs. Spotify has too many people "dedicated to supporting work" and "doing work around the work" rather than "contributing to opportunities with real impact."
Spotify employees that are impacted by layoffs will be notified by Tuesday, December 5. Severance will be based on tenure and local notice period requirements, with employees receiving an average of five months of severance.
Going forward, Ek says that Spotify must be "relentlessly resourceful" in how it operates because "being lean is not just an option but a necessity." The cuts will let the company "build an even stronger Spotify" in 2024.
In Q3 2023, Spotify brought in $3.6 billion, up from $3.2 billion in the year-ago quarter. Spotify also added 23 million monthly active users and six million paid subscribers, leading to its first profitable quarter in 2023. Profit was only at one percent, however.
Spotify is Apple Music's main competitor, and the company has long protested the fees that Apple collects through its App Store. Spotify CEO Daniel Ek this year has been urging lawmakers in the United Kingdom to adopt a bill that would regulate competition in digital markets and prevent Apple from offering a platform while also competing on that platform.
Apple and Spotify's most recent tiff happened in late 2022 when Apple rejected a Spotify app update that added audiobook support. Spotify attempted to direct customers to buy books online to listen to in the app, which Apple protested. Spotify was ultimately forced to remove all in-app information about how to purchase an audiobook from the Spotify website to get the app approved.
