2023 started with all major tech companies announcing major layoffs to reduce their headcount amidst an economic slowdown. WhileGoogle and Facebook laid off thousands of employees,Spotify axed 600 people from their jobsas a part of an organizational restructuring after the company’s operating expenses grew at twice the rate of its revenue in 2022. The music streaming service is ending the year on a similarly somber note, announcing a 17% reduction in its headcount.
Daniel Ek, Spotify’s CEO,shared a note with employees, revealing the decision to reduce the company’s headcount by 17%. He attributes this organizational change to the slowdown in the economy and capital becoming more expensive. This is Spotify’s third round of job cuts this year. It laid off about 1,500 employees at the beginning of 2023, followed by another 200 people being axed in June from its podcast division.
While Spotify could have made smaller headcount reductions in 2024 and 2025, it would not have aligned with the company’s financial goal and the current operational costs. Due to this, Ek decided that reducing the company’s headcount by 17% is the “right action.” He believes these layoffs will help Spotify become “relentlessly resourceful” by removing people “dedicated to supporting work and even doing work around the work rather than contributing to opportunities.”
So, how will a leaner structure benefit Spotify? It will allow the company to “invest our profits more strategically back into the business. With a more targeted approach, every investment and initiative becomes more impactful, offering greater opportunities for success. This is not a step back; it’s a strategic reorientation.”
Like other tech companies, Spotify’s headcount grew drastically during COVID-19 as it focused on rapid growth. This made the company “more productive but less efficient.” Capital was also available for cheap back then, which is no longer the case.
Employees affected by this layoff must have already received a calendar invite from their HR for a one-on-one meeting. Thankfully, Spotify will provide the average laid-off employee with about five months of severance pay and cover their healthcare during this period.
