This came after Spotify reported a profit of 65 million euros ($70.7 million) in the third quarter, driven by lower spending on marketing and human resources.
Spotify increased the prices of its subscriptions earlier this year and is expanding into podcasts and audiobooks.
The latest round of layoffs follows successive cuts at the company, which, like other growth-oriented technology companies, was forced to cut costs last year due to higher interest rates and a deteriorating macroeconomic environment.
Over the last two years, we have placed great emphasis on building Spotify into a truly great and sustainable company – one that is designed to achieve our goal of being the world’s leading audio company and one that continues to be profitable and will consistently drive growth. While we have made significant progress, as I have said many times, we still have a lot of work to do. Economic growth has slowed dramatically and capital has become more expensive. Spotify is no exception to this reality.
This brings me to a decision that will be a significant step for our company. To align Spotify with our future goals and ensure we are right-sized to meet the challenges ahead, I have made the difficult decision to reduce our total headcount across the company by approximately 17%. I recognize that this will have an impact on a number of people who have made valuable contributions. To be clear: many smart, talented and hard-working people will be leaving us.
For those who leave, we are a better company because of your dedication and hard work. Thank you for sharing your talents with us. I hope you know that your contributions have profoundly impacted more than half a billion people and millions of artists, creators, and writers around the world.
I recognize that a reduction of this magnitude will be surprising to many given the recent positive earnings report and our performance. We discussed making smaller reductions in 2024 and 2025. However, given the gap between our financial target and our current operating costs, I concluded that a comprehensive effort to adjust our costs was the best option to achieve our goals. While I believe this is the right action for our company, I also understand that it will be incredibly painful for our team.
To understand this decision, I think it’s important to assess Spotify with a clear, objective lens. In 2020 and 2021, we took advantage of the opportunity presented by lower capital costs and invested significantly in team expansion, content enhancement, marketing and new verticals. These investments have largely worked, contributing to Spotify’s increased production and the platform’s robust growth over the past year. However, we are now in a very different environment. And despite our efforts to reduce costs over the past year, our cost structure is still too high for demand.
When we look back at 2022 and 2023, it is truly impressive what we have achieved. But at the same time, the reality is that much of this production has been tied to the availability of more resources. By most measures, we were more productive but less efficient. We have to be both. While we have done some work to overcome this challenge and become more efficient in 2023, we still have a long way to go before we are both productive and efficient. Today, there are still too many people dedicated to supporting work and even doing work around work rather than contributing to opportunities with real impact. More people need to focus on delivering to our most important stakeholders – creators and consumers. In two words: we must become relentlessly resourceful.
I know you will all be excited to hear the next steps of how this process will work. If you are an affected employee, you will receive a calendar invitation from Human Resources for a personal interview within the next two hours. These meetings will take place before the end of the day on Tuesday, and while Katarina will provide further details on all the specifics, please note that the following applies to all of these bandmates:
- Severance pay: We start with a baseline scenario for all employees, with the average employee receiving approximately five months of severance pay. The calculation is based on local notice requirements and the employee’s length of service.
- PTO shaft: All accrued and unused vacation will be paid to each departing employee.
- Health care: We continue to provide health insurance for employees during their severance pay period.
- Immigration support: For employees whose immigration status is related to their employment, HRBPs, along with our mobility team, work with each affected individual.
- Career support: All employees are entitled to outplacement benefits for two months.
I know this decision will be difficult for many as to which team will remain at Spotify. Please know that we are focused on treating our affected colleagues with the respect and compassion they deserve.
The decision to reduce the size of our team is a difficult but crucial step towards a stronger and more efficient Spotify for the future. But it also makes it clear that we need to change the way we work. In the early days of Spotify, our success was hard-won. We had limited resources and needed to make the most of each of our assets. Our ingenuity and creativity set us apart. As we have grown, we have strayed too far from this core principle of ingenuity.
The Spotify of tomorrow must be defined by relentless ingenuity in the way we operate, innovate and address problems. This kind of ingenuity goes beyond the basic definition – it’s about preparing for our next phase, where lean is not just an option but a necessity.
By introducing this leaner structure, we can also invest our profits back into the company more strategically. With a more targeted approach, every investment and initiative becomes more impactful and has a greater chance of success. This is not a step backwards; It is a strategic realignment. We’re still committed to investing and making bold decisions, but now with a more focused approach to ensure Spotify’s continued profitability and ability to innovate. Lean doesn’t mean having small ambitions; it means smarter and more effective ways to achieve those goals.
Today is a difficult but important day for the company. To be clear, my commitment to our mission and my belief in our ability to achieve it have never been stronger. I hope you’ll join us at Unplugged on Wednesday to discuss how we move forward together. A reduction of this size will require a change in the way we work, and we will be sharing much more about what this will mean in the coming days and weeks. Just as 2023 marked a new chapter for us, so will 2024 as we build an even stronger Spotify.
Source : www.cnbc.com