Spotify announces 3rd round of layoffs this year

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Daniel Ek is the co-founder and current CEO of Spotify. Ek released a statement earlier this week announcing that around 1,000 Spotify employees were to be laid off. (Image courtesy of Spotify)

Spotify CEO Daniel Ek shared a memo with employees on Dec. 4 announcing layoffs to reduce operating costs.

Ek confirmed that this month’s layoffs were part of an effort to reduce the operating costs of the company. This announcement came after a positive Q3 earnings report in October earlier this year.

In the memo sent to employees, Ek explained how the company had debated making smaller staff cuts through 2024 and 2025, but ultimately decided to make a larger cut this year due to the current gap between the company’s financial goal state and their current operations costs. 

“By most metrics, we were more productive but less efficient. We need to be both. While we have done some work to mitigate this challenge and become more efficient in 2023, we still have a ways to go before we are both productive and efficient,” Ek said. “Today, we still have too many people dedicated to supporting work and even doing work around the work rather than contributing to opportunities with real impact. More people need to be focused on delivering for our key stakeholders — creators and consumers. In two words, we have to become relentlessly resourceful.”

The memo put out by Ek explained that the company’s rapid expansion during 2020 and 2021 worked for the time, but the cost structure of such expansions is too big for where the company needs to be right now.

The announced layoffs will be cutting 17% of Spotify’s current workforce — just about 1,500 individual employees. This is the third round of layoffs in 2023. Spotify first let go of about 600 employees in January of this year and another 200 in June.

Spotify’s monthly average users have been consistently growing since late 2020. These graphs were presented as part of the company’s Q3 2023 earnings report. (Image courtesy of Spotify)

While Ek said these changes are going to bring about a positive next step for the platform, music producers like 26-year-old senior commercial music student Caleb Rhoton do not think much will change.

Rhoton said he believes large media corporations have lost connection with the average consumer. Companies like Spotify continue to make decisions that are wholly out of touch with what customers want, he said. In his view, Spotify has an uneven relationship with artists and does not properly compensate artists who post on the platform.

“Perhaps layoffs like this will get the ball rolling for change in a corporation like this, but I’m not going to hold my breath,” Rhoton said. “Until they start making changes that affect the consumer, instead of their employees, I don’t really see how these layoffs will affect Spotify users.”

Rhoton said that while platforms like Spotify are a great way for people to start putting their work out into the world, unless Spotify starts to make changes with the consumer in mind, not much will change for most people.

The Spotify layoffs were capped off with the announcement that Spotify CFO Paul Vogel would be leaving the company in March 2024. Ek said the reason for Vogel’s departure was that they were looking for someone with the experience necessary to help the company grow and meet market expectations.

“Over time, we’ve come to the conclusion that Spotify is entering a new phase and needs a CFO with a different mix of experiences,” Ek said. “As a result, we’ve decided to part ways, but I am very appreciative of the steady hand Paul has provided in supporting the expansion of our business through a global pandemic and unprecedented economic uncertainty.”

Vogel sold off $9.38 million dollars worth of stock after this week’s layoffs. Vogel first started working for the company in 2016 and has been Spotify’s CFO since 2020.

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