Spotify fires 1,500 employees in third layoff round this year
Music streaming giant Spotify said in an email to employees on Monday that it will reduce its total headcount by around 17% across the company. This would leave around 1,500 employees in a difficult and demotivated situation right before the holiday season. CEO Daniel Ek said a "substantial action to rightsize our costs was the best option to accomplish our objectives." Prior to this action, Spotify had laid off hundreds of employees in two previous lay-off rounds this year.
Spotify's prime strategy for meeting financial goals
During the pandemic, Spotify, among other tech firms, expanded significantly, nearly doubling its workforce to over 8,000 employees in three years due to hiring and acquisitions. However, with investors prioritizing profitability over growth, streaming-centric companies have aggressively slashed costs. Spotify reduced its workforce by about 600 employees in January this year, followed by another 200 in June, citing higher costs.
The company has turned a profit
In the latest quarter, boosted by higher streaming prices and subscriber growth globally, the company turned a profit. They expect to hit 601 million monthly listeners in the upcoming holiday quarter. Ek had mentioned to Reuters earlier that the company was still focusing on efficiencies to get more out of each dollar. A layoff round this big feels unexpectedly huge despite the good earnings.
Employees will receive severance pay equivalent to five months' salary
Under increasing investor pressure to achieve profitability, Ek directed executives to seek cost-cutting measures. The company expects that the recent layoffs will help reach its profitability goal. Ek conveyed in the email, "To be blunt, many smart, talented and hard-working people will be departing us." Employees, on average, will receive severance pay equivalent to five months' salary.
Spotify has ambitious targets to reach
Spotify, aiming for consistent profitability, is trying to focus on investments in its growing ad business and recently launched audiobooks for subscribers based in the US. Last year, at its first investor day after going public, Ek stated that he aims for Spotify to become the world's largest audio company. He set ambitious targets, aiming for $100 billion in revenue by 2030 and plans to reach profitability by 2024. As of now, Spotify's stock is trading 2.39% down at $180.69.
