Music streaming giant Spotify announced Monday its third round of layoffs in less than a year cutting 17% of its almost 9,000-strong workforce despite a $71 million third-quarter profit, citing a need to cut costs amid a slowing economy.
The headcount reduction, which amounts to around 1,500 people, was necessary to make the company leaner and more efficient in line with Spotify’s future goals and ensure it was “right-sized for the challenges ahead,” CEO Daniel EK said in a note to employees.
“I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives. While I am convinced this is the right action for our company, I also understand it will be incredibly painful for our team.
‘I recognize this will impact a number of individuals who have made valuable contributions. To be blunt, many smart, talented and hard-working people will be departing us,” said Ek.
He acknowledged that the scale of the layoffs would come as a shock given Spofity’s recent positive earnings and performance, delivering its first profit in the July-September quarter in more than a year on revenue up $349 million on the same period in 2022.
But Ek said that given the widening gap between the company’s financial goals and its current operational costs, it was the best option to accomplish its objectives. Spotify’s operating costs are on track to hit $3.45 billion in 2023.
Employees, who would be informed if they were being let go within two hours, will receive five months’ severance pay depending on local notice period and tenure rules, accrued and unused vacation pay and healthcare benefits will continue during the severance period.
They will also receive help with finding a new position and be eligible for outplacement services for two months.
Monday’s layoffs bring to around 2,300 the number of jobs Spofity has slashed this year. The company cut headcount by 600 in January, about 6% of its employees — also blamed on operational costs growing faster than revenue which it said was happening at a rate of 2-1.
That was followed in June by another 200 layoffs from its podcast business to kick off a “strategic realignment”, despite reporting a 1,400% increase in podcast listeners since ramping up its focus on podcast production.
