Spotify staff could be listening to a funerary dirge in their own Spotify Wraps. The company announced it was making sweeping staff cuts across the board, reducing global headcount by around 17%. Merry Christmas.
Spotify CEO Daniel Ek blamed the layoffs on slowing economic growth and how “capital has become more expensive.” More succinctly, he claims the company hired a lot more staff during the early pandemic years to take advantage of “lower-cost capital.” The Spotify CEO said on Monday the company now has to reduce costs. The 17% of staff is estimated to be nearly 1,600 workers from all over the globe.
Ek admitted that this would come as a surprise to the nearly one in five staff being cut, especially since the streaming company claimed to be doing pretty damn well in its most recent quarterly earnings report from October. For most of this past year, Spotify was operating at a loss of nearly $502 million, though things seemed to have been turning around as of late.
The company saw big increases in the total number of users and 11% year-over-year increases in total revenue. The problem was the company was “more productive but less efficient.” Essentially, the workers did all the right things to make the company money, but the company itself was pretty bad at putting that money where it counted. The CEO said that going forward, “being lean is not just an option but a necessity.”
Ek says the company considered instead making smaller pools of layoffs over the next two years, but “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.” Axed staff will receive severance for five months on average, and they will receive healthcare coverage during that time.
The company already had two rounds of layoffs this year, including 6% of staff in January and another 200 employees in June. Over the last few months, the streaming service also increased prices for its ad-free subscription plans.
Spotify is far from the only company that has fired staff in 2022 and 2023 after going on a hiring spree in 2020 and 2021. Just in the past few months, Amazon, Nextdoor, and LinkedIn all laid off hundreds of staff. Some companies have made claims they’ve been doing better than ever, like LinkedIn which previously said it made 5% more year-over-year revenue in its fourth fiscal quarter. Back in September, Epic Games also laid off hundreds of staff and sold off its music streaming service Bandcamp.
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