Spotify is cutting 17 percent of its workforce (or 1,500 jobs) in the third lay off round this year as the Stockholm-based streaming service endeavors to pursue greater profitability.
Spotify CEO Daniel Ek announced the move to staff members in a 1,000-word letter sent out on Monday morning: “The Spotify of tomorrow must be defined by being relentlessly resourceful in the ways we operate, innovate, and tackle problems,” it read. “Being lean is not just an option but a necessity.”
Ek went on to say that “substantial action to rightsize our costs” must be taken as Spotify hired too many employees in 2020 and 2021. “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.”
According to Ek, Spotify is spending too much money despite cost reduction efforts, and combined with high interest rates and low economic growth the company leadership decided more must be done to balance the budget.
Spotify predicts a €93 million ($100 million) to €108 million ($116 million) operating loss during Q4, contrary to its previous prediction of a €37 million ($40 million) operating profit.
“While we’ve made worthy strides, as I’ve shared many times, we still have work to do,” Ek explained. “Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities.”
Music streaming giant Spotify said that it will lay off around 1,500 employees, or 17% of its workforce, to bring down costs, after letting 600 of its staff go in January, and 200 more in June https://t.co/iKL6RHsKe6 pic.twitter.com/kHSeRv8uwd
— Reuters (@Reuters) December 4, 2023
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Spotify also raised its subscription prices earlier in 2023 and has been investing in its podcast and audiobook services.
In the beginning of 2023, Spotify cut about 6 percent of its workforce, or about 600 employees. In June, Spotify then laid off about 2 percent, or 200 jobs. Spotify’s staff ballooned to more than 8,000 workers during the pandemic and the company likewise expanded in scope.
Spotify Chief Financial Officer Paul Vogel is optimistic. “We’re doing this from a position of strength,” he said. In his view, the corporation’s fundamentals are in good shape and its projections for profitability in 2024 are on course.
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