Spotify Technology, S.A. announced that it will lay off approximately 1,500 employees, or about 17% of its entire staff. The company says the cuts are necessary to adjust operations for a very different operating environment than it anticipated when it built staff to drive growth in 2020 during the pandemic.
These are not its first layoffs in 2023…
See more on the Spotify layoffs
It is now well documented that the post-COVID period has been harsh for many companies, especially streaming services like Netflix, Disney+, and Spotify who benefited greatly during the pandemic as homebound citizens desperately searched for and consumed entertainment options. However, now the pandemic is generally passed, and consumers have many more options to entertain themselves with all of the above services suffering losses.
A Series of Steps to Right the Ship
Spotify has been slower than some of the other services to adjust its operations for this more challenging environment, but once deciding to do so, it has taken a series of steps to try and right the ship. Recently, the company dramatically scaled back its podcasting aspirations in which it had invested heavily in making a play to be the leading provider of podcasts around the world.
This initiative was kicked off with a reported $200 million acquisition of the popular podcast The Joe Rogan Experience. The company ultimately invested more than a billion dollars in its podcast division, adding even more marquee deals with celebrities, such as Kim Kardashian, and Prince Harry & Meghan Markle – and expanded its market presence around the world. The company’s goal was to reach one billion users by 2030.
Third Round of Layoffs in 2023
Spotify has since scaled back its aspirations – as well as its podcast division – although the company says it remains committed to the category.
As far as workforce reduction, Spotify announced its first round of layoffs back in January, when it laid off 600 employees. Then, in June, it cut 200 more of its staff. Today’s announcement of 1,500 job cuts is likely to be its last round in 2023.
In an internal blog post to employees, company CEO Daniel Ek said the jobs were cut “as part of a ‘strategic reorientation.'” Although Ek did not specify the actual number of positions to be cut, the Associated Press confirmed with company representatives that it would be around 1,500 jobs.
We now find ourselves in a very different environment. And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big.Daniel Ek, CEO of Spotify
Company Has A $500 Million Net Loss So Far This Year; More is Coming
On a year-to-date basis for the first nine months of 2023, Spotify reported a net loss of €462 million (approximately $500 million). Ek said in the blog post that this “leaner structure” will help to ensure “Spotify’s continued profitability.”
The company says that this round of layoffs will result in a charge to earnings of between €130 million – €145 million in the fourth quarter. There will also be some lingering cash charges in the first and second quarters of the next fiscal year.
Five Months of Severance for Cut Employees
The company is offering laid-off employees a total of five months’ severance pay, plus vacation pay, plus healthcare coverage during the severance period. The company recast its fourth quarter guidance saying this move will flip the previously forecast net profit of €37 million in the quarter to a net loss of between €93 million to €108 million.
Spotify is not the only tech-related company to double-dip on layoffs this year. According to Reuters, both Amazon and Microsoft-owned LinkedIn had recent announcements of a round of workforce reductions, while both of them had also had rounds of layoffs earlier in 2023. So this appears to be a bit of a theme this year.
Ek: A Substantial Action was the ‘Best Option’
We debated making smaller reductions throughout 2024 and 2025. Yet, 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 to accomplish our objectives.Ek
Learn more about Spotify by visiting spotify.com.