Spotify announces its third set of layoffs this year, reducing its headcount by 17%

The streaming service wants to become “relentlessly resourceful” going forward

Readers like you help support Android Police. When you make a purchase using links on our site, we may earn an affiliate commission. Read More.

Summary

• Spotify announces a 17% reduction in its headcount due to economic slowdown and rising capital costs.
• Despite strong performance and profitability, the company sees the need for leaner operations to align with financial goals.
• The layoffs aim to make Spotify more strategically focused, allowing greater opportunities for success and efficient use of profits.

2023 started with all major tech companies announcing major layoffs to reduce their headcount amidst an economic slowdown. While Google and Facebook laid off thousands of employees, Spotify axed 600 people from their jobs as a part of an organizational restructuring after the company's operating expenses grew at twice the rate of its revenue in 2022. The music streaming service is ending the year on a similarly somber note, announcing a 17% reduction in its headcount.

Daniel Ek, Spotify's CEO, shared a note with employees, revealing the decision to reduce the company's headcount by 17%. He attributes this organizational change to the slowdown in the economy and capital becoming more expensive. This is Spotify's third round of job cuts this year. It laid off about 1,500 employees at the beginning of 2023, followed by another 200 people being axed in June from its podcast division.

In the note, Daniel Ek touches on the point that these layoffs are coming after the company's strong performance in the recently concluded quarter, where it saw its subscriber base grow to 226 million and revenue by 11% to €3.4 billion. More importantly, the streaming service reported an operating income of €65 million ($69 million), its first profit in about 18 months. This would likely have been helped by Spotify Premium getting more expensive in the US by $1 after nearly 12 years. A similar price hike took effect in other key international markets in June 2023.

While Spotify could have made smaller headcount reductions in 2024 and 2025, it would not have aligned with the company's financial goal and the current operational costs. Due to this, Ek decided that reducing the company's headcount by 17% is the "right action." He believes these layoffs will help Spotify become "relentlessly resourceful" by removing people "dedicated to supporting work and even doing work around the work rather than contributing to opportunities."

So, how will a leaner structure benefit Spotify? It will allow the company to "invest our profits more strategically back into the business. With a more targeted approach, every investment and initiative becomes more impactful, offering greater opportunities for success. This is not a step back; it's a strategic reorientation."

Like other tech companies, Spotify's headcount grew drastically during COVID-19 as it focused on rapid growth. This made the company "more productive but less efficient." Capital was also available for cheap back then, which is no longer the case.

Employees affected by this layoff must have already received a calendar invite from their HR for a one-on-one meeting. Thankfully, Spotify will provide the average laid-off employee with about five months of severance pay and cover their healthcare during this period.