Spotify, the Stockholm-based music streaming giant, is set to slash nearly 1,600 jobs, amounting to 17 percent of its workforce, as the company cites a sluggish economy and escalating borrowing costs.
This marks the third and most significant round of layoffs for Spotify in 2023, reflecting a broader trend among major tech companies grappling with economic headwinds.
Daniel Ek, the billionaire founder and CEO of Spotify, addressed the workforce reduction in a message posted on the company’s website on Monday.
Employees affected by the cuts were informed they would receive a one-on-one conversation invitation from the Human Resources department within the next two hours.
The decision comes amidst a wave of layoffs across the tech industry, with giants like Meta, Microsoft, Amazon, and Alphabet also implementing large-scale redundancies in response to rising interest rates and investor pressure to cut costs and safeguard profits.
Reduced investment into podcasts
Spotify, a dominant force in the global music streaming arena, had previously faced the economic downturn by reducing its investment in podcasting. Despite being one of the few European companies challenging its US counterparts, Spotify chose to pull back from its extensive podcast investment, including a now-terminated deal with Prince Harry and the Duchess of Sussex.
Daniel Ek acknowledged that Spotify had taken advantage of favorable borrowing conditions in 2020 and 2021 when central banks slashed interest rates during the COVID-19 pandemic. However, Ek noted, “we now find ourselves in a very different environment,” leading to the necessity of further cost-cutting measures.
Additional cuts
The company, which reported 9,400 employees at the end of the third quarter of 2023, had already reduced its workforce by 6 percent in January and an additional 2 percent in June. Ek emphasised that despite efforts to control costs over the past year, the current cost structure remains too substantial for the company’s strategic goals.
Redundant employees will receive a severance package averaging five months of pay, including unused holiday pay. Ek stated that the leaner structure resulting from the layoffs would enable Spotify to reinvest profits more strategically into the business.
As Spotify grapples with these significant changes, the tech industry continues to navigate challenges posed by economic shifts and investor expectations, highlighting the delicate balance between growth and fiscal responsibility in the current business landscape.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
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