In a surprising move just before the holidays, Spotify announced that it will lay off 1,500 employees, which represents 17 percent of its workforce. CEO Daniel Ek cited “challenges ahead” as the reason for the cuts and stated that they needed to be made immediately instead of gradually over time. This decision comes despite a recent positive earnings report and the company’s performance. Ek acknowledged that the layoffs will be difficult for the team but emphasized that they are necessary to align the company’s financial goals with its current operational costs.
According to Ek, the company expanded significantly in 2020 and 2021, but its cost structure is still too large. The latest round of layoffs will result in around 1,500 employees losing their jobs, with the majority of them being in the US. To lessen the impact, Spotify will provide an average of five months severance, healthcare coverage, and immigration/career support for those affected.
Ek stated that for the company’s next phase, being lean is not just an option but a necessity. Additionally, Spotify recently announced a new royalty model intended to give “working artists” a larger share of the revenue while reducing fraudulent streams. Despite the layoffs, Spotify has seen consistent growth, with 574 million monthly active users, marking a 26 percent increase over the same period last year.
Ek promised to provide more information about the changes in the coming days and weeks, but for now, the news of the layoffs will undoubtedly be tough for the affected employees, especially as they face unemployment just before the holidays.
