Spotify layoffs: Why is the music platform cutting 17 percent of its workforce?
Music streaming platform Spotify has announced it is cutting 17% of its workforce despite reporting third-quarter profits, in an effort to reduce spending.
Spotify announced that it will be cutting 17% of its workforce, after which its shares closed 7% higher. CEO Daniel Ek said in an email to employees that the move aims to cut costs and adapt to a slowdown in economic growth.
The CEO said that the company employed too many people in 2020 and 2021, when capital cost less and they could pour more resources into expansion. Spotify had almost doubled the number of its staff over the past three years.
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Spotify wants to ensure it is ’right-sized’
“Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities,” said Ek in the memo.
“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,” according to Ek.
The latest round of layoffs affects around 1,500 workers. It’s the third time the company is slashing jobs this year. The Swedish company laid off 6% of its employees in January and 2% in June.
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Spotify reports millions in third-quarter profit
Spotify is letting go of employees even as it reported profits of more than $70 million in the third quarter of this year. The streaming service had increased the prices of its subscription rates earlier in 2023, raising the price of Spotify Premium to $10.99 a month, up one dollar from its previous rate.
The hike does not come as a surprise, as the company had pegged its subscription at $9.99 since its launch in the United States 12 years ago.
Employees who will lose their jobs will be given approximately five months of severance pay, immigration support for those whose immigration status is dependent on their employment with the company, and health care during the severance period.