Continuing the trend set by the likes of high-profile companies such as Microsoft, Google-parent Alphabet, Meta, Twitter, Amazon, and others, Swedish music streaming giant Spotify is joining the infamous queue. The company is looking to lay off 6% of its workforce as it prepares for a possible economic recession.
This development comes ahead of its financial results for the final quarter of the previous year, which are set to be reported on Tuesday, January 31. Spotify’s shares rose 3.5% in premarket trading to be currently placed at $97.91. Seems like lay-offs are the only way left for market shareholders to be making more money.
This fresh round of layoffs will impact around 600 jobs, adding to the 38 employees Spotify had fired from its Gimlet Media and Parcast podcast studios in October 2022. As per its earnings report in the third quarter of the previous year, Spotify had around 9800 employees.
And if this is not enough, the music streaming giant will also lose Dawn Ostroff, its chief content and advertising business officer. Ostroff will be parting ways with the company, while other top executives Gustav Söderström and Alex Norström have been elevated to the post of co-president. This restructuring, according to the company, will cost Spotify around €35 million-45 million in severance-related charges.
In an email to the staff, Spotify CEO Daniel Ek informed that the reduction in its workforce followed his “ambitious” investments ahead of the music streaming service’s revenue growth. “I hoped to sustain the strong tailwinds from the pandemic and believed that our broad global business and lower risk to the impact of a slowdown in ads would insulate us,” read the email to staff.
The impacted employees will be provided with 5 months of severance on average, along with accrued and unused vacation time. Other benefits such as healthcare during the severance period, immigration support, and career support will be provided to them as well.
The latest round of layoffs comes as Spotify’s response to reduce its costs, especially since Ek highlighted that the operating expenditure growth of the music streaming service more than twice its revenue growth in 2022. This, among other reasons, prompted Spotify to finalize its decision to fire hundreds of its employees. “That would have been unsustainable long-term in any climate, but with a challenging macro environment, it would be even more difficult to close the gap,” Ek added.
From Amazon to Meta, from Microsoft to Twitter and Google, numerous employees have found themselves out of a job since last year. The reasons are simple – a funding winter withered the flow of capital while rising inflation, an economic downturn, and other adverse macroeconomic conditions ensured that over 1,024 tech companies laid off more than 150,000 employees last year.
Apart from the above, Sweden-based Spotify witnessed its advertisers cut down on expenditure and tighten their purse strings. This led to a slowdown in hiring – which Spotify announced in October and forecast the same for the current year.
“While we have made great progress in improving speed in the last few years, we haven’t focused as much on improving efficiency. We still spend far too much time syncing on slightly different strategies, which slows us down. And in a challenging economic environment, efficiency takes on greater importance. So, in an effort to drive more efficiency, control costs, and speed up decision-making, I have decided to restructure our organization,” Ek said.