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Spotify will axe almost a fifth of its workforce after warning that economic growth has slowed and that the group needs to “rightsize” its costs.
In a memo to staff on Monday, chief executive Daniel Ek said Spotify would cut about 17 per cent of its global workforce. Spotify employs more than 9,000 people worldwide.
“I recognise this will impact a number of individuals who have made valuable contributions,” Ek said. “To be blunt, many smart, talented and hard-working people will be departing us.”
Spotify has been on a tear in terms of growth over the past few years, adding tens of millions of subscribers. But the music service has long struggled to make a consistent profit. It has been under pressure to curb costs after an expensive push into podcasting that tried investors’ patience.
Ek said the group had debated making smaller cuts next year and in 2025, but opted for a bigger restructuring now.
“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 said.
The announcement comes just over a month after Spotify’s effort to curb costs showed some signs of paying off. In October, the New York-listed company pointed to cost cuts and price rises for helping it report a third-quarter profit.
However, on Monday Ek said Spotify was still facing new realities, including a higher cost of capital, and that the group needed to become more efficient.
In Spotify’s early days “our ingenuity and creativity were what set us apart”, said Ek. “As we’ve grown, we’ve moved too far away from this core principle of resourcefulness.”
The company is already unwinding some of the ambitious push into podcasts it made during the coronavirus pandemic. Over the past year, it has cancelled a number of its original podcast shows, including several true crime series.