Spotify has decided to unexpectedly lay off 17% of employees across the company ahead of the holidays, CEO Daniel Ek announced in a press release. He made the decision to downsize because of “future challenges” and decided to do it immediately instead of laying off employees gradually over the next few years. He added that affected employees would be notified today.
“I realize that for many, a reduction of this magnitude will be surprisingly large given the company’s recent positive earnings report,” written by Ek. “We have debated a smaller reduction in staff numbers during 2024 and 2025.” However, due to the gap between the target financial situation and the current operating costs, Ek ultimately decided that the best way to achieve the company’s goals was to radically reduce the number of employees.
Ek further noted that the company grew significantly in 2020 and 2021 due to lower cost of capital. And despite the austerity measures implemented last year (the company laid off 6% of employees at the start of 2023 and another 2% in May), “our cost structure is still too big,” Ek said. After previous rounds of layoffs, Spotify had approximately 9,000 employees (4,300 of which were in the US in 2022), so approximately 1,500 employees will lose their jobs during the latest cuts. To mitigate the impact of layoffs on employees, Spotify will pay employees an average of five months’ severance pay, pay for health care and provide career support.