Music streaming platform cuts 17% of staff in recent layoffs.
Due to a sluggish economy and increased borrowing costs, Spotify is reducing over 1,500 jobs in the latest wave of layoffs among major tech firms.
Spotify’s billionaire founder and CEO, Daniel Ek, announced a 17% workforce reduction, marking the third and most significant round of layoffs in 2023, driven by pressure from an activist investor.
Ek informed staff that those impacted by the layoffs would receive a calendar invitation for a one-on-one conversation within the next two hours from HR. The message was published on Spotify’s website on Monday.
In 2023, major tech firms like Meta, Microsoft, Amazon, and Alphabet underwent retrenchment and significant layoffs amid rising interest rates and investor emphasis on cost-cutting to safeguard profits.
Based in Stockholm, Spotify dominates the global music streaming scene, standing out as one of the few European companies challenging their US counterparts. However, as the global economy’s momentum has slowed, Spotify has scaled back its previous substantial investments in podcasting. This included supporting a podcast by Prince Harry and the Duchess of Sussex, which concluded with apparent discord this year.
Despite this, Spotify continues to engage in valuable podcasting partnerships, including a controversial deal with Joe Rogan and collaborations with influencer Emma Chamberlain and comedian Trevor Noah.
In October, the company announced plans to provide customers with up to 15 hours of audiobooks monthly, creating an additional revenue stream and directly competing with platforms like Amazon-owned Audible.
Ek mentioned that Spotify capitalized on low-interest rates in 2020 and 2021 when central banks drastically cut rates amid pandemic lockdowns. However, he noted that the company now faces a changed environment. Despite ongoing efforts to cut costs, Ek expressed that the current cost structure remains too large for the company’s needs.
Valued at over $35 billion on the New York Stock Exchange, Spotify has become a target for San Francisco-based activist investor ValueAct, which has accumulated a $220 million stake.
In pre-market trading, Spotify’s stock price rose by 7% to surpass $180. While the company’s market value has more than doubled in the current year, it still falls short of its levels at the beginning of 2022 and its peak above $360 in February 2021, when pandemic-induced rate cuts propelled tech companies to unprecedented highs.
As of the end of the third quarter of 2023, Spotify reported a workforce of 9,400 employees. The company had previously reduced employee numbers by 6% in January and an additional 2% in June. Employees affected by the recent layoffs will be provided with an average of five months of severance pay along with unused holiday pay, according to Ek.
