Spotify prepares layoffs for 1,500 employees

(Patria) - Swedish music streaming company Spotify announced that it will lay off 17 percent of its workforce due to rising costs.

This amounts to about 1,500 jobs, which is the third and most severe round of layoffs in 2023.

Spotify CEO Daniel Ek stated that he made the difficult decision in light of the dramatic slowdown in economic growth.

Spotify employs around 9,000 people, and Ek says significant action is needed to correct costs for the company to meet its goals.

He added that he understands the cuts will be incredibly painful for the team.

- I understand that this will affect many individuals who have made valuable contributions. But to be honest, many smart, talented, and dedicated people will be leaving us - Ek stated.

He also pointed out that Spotify took advantage of cheap borrowing during 2020 and 2021, when central bankers sharply reduced interest rates in response to COVID-19 lockdowns, but that they are now in a very different environment.

- Despite our efforts to reduce costs last year, our cost structure is still too high - Ek asserted.

Spotify announced it had 9,400 employees at the end of the third quarter of 2023. It had already reduced its workforce by six percent in January and an additional two percent in June.

Major tech companies - from Meta and Microsoft to Amazon and Alphabet - laid off a large number of people during 2023, after interest rates rose and investors focused on cost reduction to protect profits.

In its latest results, Spotify reported a profit of 65 million euros for the three months ending in September - its first quarterly profit in over a year - aided by price increases and a growing subscriber base.

Ek said that, given the recent positive results, the announced job cuts will be surprising to many people.

He emphasized that Spotify considered smaller reductions during 2024 and 2025 but decided that more drastic measures were necessary to improve the company's financial performance.

Headquartered in Stockholm, Spotify is a dominant player in global music streaming and one of the few European companies competing with American rivals.

However, as the momentum of the global economy weakened, the company reined in its previous large investments in podcasting.

Indeed, since its launch, Spotify has spent a lot of money on business development and securing exclusive content such as podcasts created by Michelle and Barack Obama, as well as the Duke and Duchess of Sussex - Prince Harry and Meghan Markle.

The deal with Harry and Meghan cost the company $25 million, and only 12 episodes were delivered over two and a half years before the contract ended in June.

Commenting on the podcast content, Ek told the BBC earlier: "The truth is that some of it worked, and some of it didn't."