Today, Spotify announced that they will be laying off 17% of their staff a number that works out to be more than 1,000 employees. This comes as CEO Daniel Ek said the company needs to cut costs.
“To align Spotify with our future goals and ensure we are right-sized for the challenges ahead, I have made the difficult decision to reduce our total headcount by approximately 17% across the company. 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.” Ek said in a statement on its website.
Spotify said they debated doing smaller reductions through 2024 and 2025 but decided to do one large on instead.
CEO Ek went on to explain why the layoffs are happening now. “To understand this decision, I think it is important to assess Spotify with a clear, objective lens. In 2020 and 2021, we took advantage of the opportunity presented by lower-cost capital and invested significantly in team expansion, content enhancement, marketing, and new verticals. These investments generally worked, contributing to Spotify’s increased output and the platform’s robust growth this past year. However, we now find ourselves in a very different environment. And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big.”
Impacted employees will receive:
- Severance pay: We will start with a baseline for all employees, with the average employee receiving approximately five months of severance. This will be calculated based on local notice period requirements and employee tenure.
- PTO: All accrued and unused vacation will be paid out to any departing employee.
- Healthcare: We will continue to cover healthcare for employees during their severance period.
- Immigration support: For employees whose immigration status is connected with their employment, HRBPs are working with each impacted individual in concert with our mobility team.
- Career Support: All employees will be eligible for outplacement services for two months.
“Today is a difficult but important day for the company. To be very clear, my commitment to our mission and belief in our ability to achieve it has never been stronger. I hope you will join me on Wednesday for Unplugged to discuss how we move forward together. A reduction of this size will make it necessary to change the way we work, and we will share much more about what this will mean in the days and weeks ahead. Just as 2023 marked a new chapter for us, so will 2024 as we build an even stronger Spotify. ” Daniel Ek said in closing.
This all comes as Spotify and other companies are dealing with a very soft ad market that has pushed many companies’ revenue down. Now many companies are worried the ad market will not turn around and that they will need to cut costs to deal with lower revenue. Spotify seems to be one of these companies.