One day after Europe celebrated the first Christmas advent, Spotify workers woke up to the startling news that one out of every six will be losing their job.
The biggest layoffs in the platform’s 15-year history come just weeks after it posted a surprise profit for the third quarter.
Billionaire founder and CEO Daniel Ek blamed the 17% reduction to its estimated 9,000 headcount on an organization that had become too bloated and inefficient to prosper amid the darkening economic clouds.
“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,” he wrote in a staff memo published on Monday, adding employees affected will receive roughly five months of severance.
For his workforce, the year ends much like it began.
In January Spotify announced a round of layoffs for 6% of its staff, later following that up with a smaller, more targeted headcount reduction at its high-profile podcasting division.
Ek said his team had debated spreading the pain over the next two years but ultimately chose to swallow the bitter pill all at once.
Given where the company needed to be to hit its financial targets, he argued it was the only prudent course of action.
“I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives,” he said, taking personal ownership of the layoffs.
The CEO pitched the move as a “strategic reorientation” back to Spotify’s roots as a scrappy startup, when limited resources forced it to fight relentlessly for each success.
“Our ingenuity and creativity were what set us apart,” he claimed. “As we’ve grown, we’ve moved too far away from this core principle of resourcefulness.”
$1 billion gamble in podcasting fails to pay off
Stockholm-based Spotify remains the global leader in audio streaming, with 574 million monthly active users, a figure that includes 226 million premium subscribers who pay extra to enjoy the service ad-free.
But the company faces increased competition from deep-pocketed U.S. tech giants Apple, Amazon and YouTube, a subsidiary of Google, that can afford to overspend on their respective digital streaming platforms.
To maintain its lead as music subscriber growth began to peak, Spotify pivoted to make a high-stakes bet on growth in the podcasting segment.
It splashed out around $1 billion to nab exclusive deals with celebrities like Joe Rogan, Barack Obama and Kim Kardashian but many failed to pay off for Ek and his investors. This summer a prominent $20 million deal with Prince Harry and wife Meghan Markle ended acrimoniously.
While Spotify's revenue base did grow, the CEO admitted on Monday rewards were only proportional to the amount invested.
Now that the days of easy money are over following the recent bout of high inflation, it was time to put an end to this opportunistic gamble and rein in inefficient spending.
“Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities.”
The audio streamer isn’t the only successful Swedish export to rethink its approach to staffing. On Monday, the buy-now-pay-later fintech Klarna told UK daily The Telegraph it would freeze hiring and increase the amount of work that could be done by ChatGPT.
Spotify was contacted for comment but declined to comment further.
