Bad news for workers at the music streaming giant, as Spotify kicked off the week announcing a new round of layoffs. Specifically, this is the third round of layoffs the company has announced so far this year. Additionally, this round significantly has the most employees being let go of all the previous ones. The company initially planned to make minor adjustments in 2024 and 2025 but ultimately decided on this drastic move to “straighten out our costs” as soon as possible.
As expected, in a letter to employees, Spotify’s CEO Daniel Ek stated that the layoffs were due to excessive hiring between 2020 and 2021. However, these layoffs coincide with the company having nearly doubled its user base compared to those years. Not to mention increased profits after raising the prices of its subscription services.
Spotify will lay off 17% of its workforce
To be precise, 17% of Spotify’s workforce equates to about 1,500 employees. This is a new move to cut costs and is the most significant one. In June, they let go of 200 employees, and 2023 began with an announcement of 600 more layoffs. In total, around 2,300 employees have been laid off so far this year.
After a round of workforce cuts earlier in the year, some technology companies have reduced their workforce once again. This is nothing new, as even Amazon and LinkedIn announced layoffs. Although the excuse given during the COVID years was for excessive hiring, at the end of 2020, Spotify had 345 million users. Currently, that number has skyrocketed to 601 million users.
In the third quarter, the company made profits due to increased prices for its streaming services and subscriber growth in all regions. Spotify predicted that its number of monthly listeners would reach 601 million in the holiday quarter. It seems that everything is going smoothly despite the announcement of more layoffs.
The quickest and simplest way to save money is to get rid of part of your workforce
At that time, Daniel Ek told Reuters that the company continued to focus on efficiency to get more out of every dollar. Obviously, the quickest and simplest way to cut costs at Spotify, and any other company, is to lay off employees.
“A reduction of this size will feel significant given the recent positive earnings report and its performance. According to most indicators, we have been more productive but less efficient. We need both.”
The company will begin notifying affected employees today. Employees will receive about five months of severance pay, vacation pay, and health coverage during the layoff period. The company will also offer immigration support to employees whose immigration status is related to their employment.
“We considered making smaller reductions throughout 2024 and 2025. However, given the gap between our target financial state and our current operating costs, I decided that substantial action to straighten out our costs was the best option to achieve our goals.”
This update was first reported on El Chapuzas Informático under the title “Spotify prepares for the third round of layoffs of the year: farewell to 17% of the workforce.”