In a surprise move before the holidays, Spotify is cutting 17 percent of its workforce, CEO Daniel Ek announced. The decision is attributed to “challenges ahead” and is being made immediately instead of through smaller reductions over time. Affected employees will be notified later today.
Ek acknowledged that the size of the reduction is large, especially considering the recent positive earnings report and company performance. He stated that smaller reductions over the next two years were considered, but due to the financial gap and operational costs, a substantial action was necessary. Ek recognizes that this will be a painful transition for the team.
According to Ek, the company expanded significantly in 2020 and 2021, resulting in a lower cost of capital and increased output. Despite previous layoffs in 2023, the company’s cost structure still needs to be reduced.
After the layoffs, Spotify will have approximately 9,000 employees, with around 1,500 losing their jobs in the latest cut. Ek stated that affected employees will receive an average of five months severance pay, healthcare coverage, and immigration/career support.
Ek emphasized the necessity of being lean for the company’s next phase. Spotify recently announced a revised royalty model aimed at benefiting “working artists” and reducing fraudulent streams.
While Spotify continues to experience growth, with 574 million monthly active users, profitability has been a challenge. Ek promised more details about the changes in the coming days and weeks, but this is little consolation for employees facing sudden unemployment just before the holidays.