Spotify, the prominent music streaming platform, has announced its decision to lay off approximately 1,500 employees, constituting 17% of its workforce of over 9,000 employees. This move comes after earlier layoffs of 600 staff members in January and an additional 200 in June.
Reuters reports that in a letter addressed to the company’s employees, Spotify’s CEO, Daniel Ek, highlighted that the substantial hiring undertaken in 2020 and 2021 was influenced by the lower cost of capital. Despite an increase in output, much of the growth was attributed to the availability of additional resources.
The impact of these layoffs will result in charges ranging from EUR130 million (~RM657.5 million) to EUR145 million (~RM733.4 million) in the fourth quarter. The company clarified that the majority of the cash component of these charges would be reflected in the first and second fiscal quarters of 2024.
Contrary to the initial forecast of an operating profit of EUR37 million (~RM187.1 million), Spotify now anticipates a fourth-quarter operating loss between EUR93 million (~RM470.3 million) and EUR108 million (~RM546.3 million). This strategic shift is part of Spotify’s ongoing efforts to manage costs effectively.
Notably, Spotify has invested over a billion dollars to fortify its podcast business, securing partnerships with high-profile figures such as Kim Kardashian, Prince Harry, and Meghan Markle. The company expanded its market presence globally in pursuit of reaching a billion users by 2030.
Despite a third-quarter profit, driven by price increases in its streaming services and a surge in subscribers across regions, Spotify recognises the need for greater efficiency. “By most metrics, we were more productive but less efficient. We need to be both,” Ek said.
Affected employees will be notified starting Monday (4 December), receiving approximately five months of severance pay, vacation pay, and healthcare coverage during the severance period.
“We debated making smaller reductions throughout 2024 and 2025,” Ek said. “Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives.”
