Spotify is laying off 6% of its workforce, CEO Daniel Ek has announced, in an effort to reduce costs and improve efficiencies within the business.
In a letter to employees, published on the company’s website, Ek explained that last year Spotify’s high levels of investment, combined with a slowdown in the overall advertising market, resulted in the company’s operational expenditure being double its revenue growth.
“That would have been unsustainable long-term in any climate,” Ek wrote, “but with a challenging macro environment, it would be even more difficult to close the gap. As you are well aware, over the last few months we’ve made a considerable effort to rein-in costs, but it simply hasn’t been enough.”
“Like many other leaders, I hoped to sustain the strong tailwinds from the pandemic and believed that our broad global business and lower risk to the impact of a slowdown in ads would insulate us. In hindsight, I was too ambitious in investing ahead of our revenue growth. And for this reason, today, we are reducing our employee base by about 6% across the company. I take full accountability for the moves that got us here today.”
Spotify has spent heavily over the last several years, making a series of major acquisitions, including buying Gimlet Media and Anchor for €300 million, and Megaphone for $235 million. The most recent round of layoffs follow another series of cuts in October, in which 38 staff from Gimlet and Parcast post their jobs.
As of Spotify’s latest earning report, the company had 9,800 employees so a 6% reduction is potentially affecting just under 600 employees. The company has not announced which roles or areas will be affected by the layoffs, but meetings with affected individuals are taking place today.
The company is offering a baseline level of five months’ severance pay, with all unused holiday paid out and healthcare covered during the severance period. Spotify will also provide departing employees with two months’ of outplacement service for career support and will work with employees whose immigration status is connected with their workplace.
In addition to these redundancies, Spotify is also making some changes at the executive level, including appointing chief R&D officer Gustav Söderström to chief product officer and Alex Norström as chief business officer. Chief content and advertising business officer Dawn Ostroff, meanwhile, will be leaving the company, around a month after she stated that Spotify would continue to cut poorly-performing shows.