Spotify simply laid off 17% of their workforce, or roughly 1,500 folks, to regulate for what CEO Daniel Ek stated in a memo to employees is due progress slowing down “dramatically” and capital turning into dearer. Ek notes that the transfer is aimed toward lowering Spotify’s prices and adjusting for slowed progress. A supply from Spotify wouldn’t affirm to CNBC that 1,500 was an correct quantity for the quantity of jobs affected.
For a little bit extra context, Ek explains that Spotify took benefit of lower-cost capital in 2020 and 2021. This meant expansions of their groups, content material enhancement, advertising and marketing, and new enterprise verticals. This resulted in additional productiveness however much less effectivity. Now in 2023 on the cusp of the choice to put a bunch of individuals off proper earlier than Christmas, “we nonetheless have too many individuals devoted to supporting work and even doing work across the work slightly than contributing to alternatives with actual influence. Extra folks have to be centered on delivering for our key stakeholders – creators and customers. In two phrases, we’ve to grow to be relentlessly resourceful.”
Once more, proper earlier than Christmas. Actual good.
This information comes on the heels of Spotify not too long ago asserting that they’d not pay royalties for any piece of music that had less than 1,000 streams yearly starting in 2024. Spotify additionally laid off roughly 600 staff at the beginning of 2023, adopted by a layoff of roughly 200 folks in June.
You possibly can learn the total memo from Ek under, which equates your traditional company “thanks for the arduous work and do not let the door hit you within the ass on the way in which out.”
“During the last two years, we have put important emphasis on constructing Spotify into a really nice and sustainable enterprise – one designed to attain our objective of being the world’s main audio firm and one that can persistently drive profitability and progress into the long run. Whereas we have made worthy strides, as I’ve shared many occasions, we nonetheless have work to do. Financial progress has slowed dramatically and capital has grow to be dearer. Spotify isn’t an exception to those realities.
“This brings me to a choice that can imply a big step change for our firm. To align Spotify with our future targets and guarantee we’re right-sized for the challenges forward, I’ve made the troublesome choice to scale back our complete headcount by roughly 17% throughout the corporate. I acknowledge this may influence quite a few people who’ve made worthwhile contributions. To be blunt, many good, gifted and hard-working folks can be departing us.
“For these leaving, we’re a greater firm due to your dedication and arduous work. Thanks for sharing your abilities with us. I hope you understand that your contributions have impacted greater than half a billion folks and hundreds of thousands of artists, creators, and authors world wide in profound methods.
“I notice that for a lot of, a discount of this dimension will really feel surprisingly giant given the current constructive earnings report and our efficiency. We debated making smaller reductions all through 2024 and 2025. But, contemplating the hole between our monetary objective state and our present operational prices, I made a decision {that a} substantial motion to rightsize our prices was the best choice to perform our targets. Whereas I’m satisfied that is the precise motion for our firm, I additionally perceive will probably be extremely painful for our staff.
“To grasp this choice, I believe you will need to assess Spotify with a transparent, goal lens. In 2020 and 2021, we took benefit of the chance introduced by lower-cost capital and invested considerably in staff enlargement, content material enhancement, advertising and marketing, and new verticals. These investments usually labored, contributing to Spotify’s elevated output and the platform’s strong progress this previous yr. Nonetheless, we now discover ourselves in a really totally different surroundings. And regardless of our efforts to scale back prices this previous yr, our price construction for the place we have to be continues to be too large.
“After we look again on 2022 and 2023, it has really been spectacular what we’ve achieved. However, on the identical time, the fact is far of this output was linked to having extra sources. By most metrics, we had been extra productive however much less environment friendly. We have to be each. Whereas we’ve carried out some work to mitigate this problem and grow to be extra environment friendly in 2023, we nonetheless have a methods to go earlier than we’re each productive and environment friendly. At present, we nonetheless have too many individuals devoted to supporting work and even doing work across the work slightly than contributing to alternatives with actual influence. Extra folks have to be centered on delivering for our key stakeholders – creators and customers. In two phrases, we’ve to grow to be relentlessly resourceful.
“I do know you’ll all be troubled to listen to the subsequent steps about how this course of will work. If you’re an impacted worker, you’ll obtain a calendar invite inside the subsequent two hours from HR for a one-on-one dialog. These conferences will happen earlier than the tip of the day on Tuesday, and whereas Katarina will present extra element on all the specifics, please know the next will apply to all of those bandmates:
“Severance pay: We are going to begin with a baseline for all staff, with the typical worker receiving roughly 5 months of severance. This can be calculated primarily based on native discover interval necessities and worker tenure.
- PTO: All accrued and unused trip can be paid out to any departing worker.
Healthcare: We are going to proceed to cowl healthcare for workers throughout their severance interval. - Immigration assist: For workers whose immigration standing is related with their employment, HRBPs are working with every impacted particular person in live performance with our mobility staff.
- Profession Assist: All staff can be eligible for outplacement providers for 2 months.
For the staff that can stay at Spotify, I do know this choice can be troublesome for a lot of. Please know we’re centered on treating our impacted colleagues with the respect and compassion they deserve.
“Wanting Forward – The choice to scale back our staff dimension is a tough however essential step in direction of forging a stronger, extra environment friendly Spotify for the long run. But it surely additionally highlights that we have to change how we work. In Spotify’s early days, our success was arduous gained. We had restricted sources and needed to benefit from each asset. Our ingenuity and creativity had been what set us aside. As we have grown, we have moved too distant from this core precept of resourcefulness.
“The Spotify of tomorrow should be outlined by being relentlessly resourceful within the methods we function, innovate, and sort out issues. This sort of resourcefulness transcends the fundamental definition – it is about getting ready for our subsequent part, the place being lean isn’t just an choice however a necessity.
“Embracing this leaner construction may even permit us to take a position our income extra strategically again into the enterprise. With a extra focused method, each funding and initiative turns into extra impactful, providing better alternatives for fulfillment. This isn’t a step again; it is a strategic reorientation. We’re nonetheless dedicated to investing and making daring bets, however now, with a extra centered method, making certain Spotify’s continued profitability and talent to innovate. Lean doesn’t suggest small ambitions; it means smarter, extra impactful paths to attain them.
“At present is a troublesome however vital day for the corporate. To be very clear, my dedication to our mission and perception in our potential to attain it has by no means been stronger. I hope you’ll be part of me on Wednesday for Unplugged to debate how we transfer ahead collectively. A discount of this dimension will make it obligatory to vary the way in which we work, and we’ll share rather more about what this may imply within the days and weeks forward. Simply as 2023 marked a brand new chapter for us, so will 2024 as we construct a good stronger Spotify.”
