It comes after Spotify reported a 65 million euros ($70.7 million) revenue within the third quarter, citing decrease spend on advertising and personnel.
Spotify raised costs of its subscription plans earlier this yr and has been increasing into podcasts and audio books.
The most recent spherical of redundancies follows successive cuts on the agency, which like different growth-oriented tech companies has been pressured to chop again on prices within the final yr or so as a consequence of larger rates of interest and a worsening macroeconomic backdrop.
Crew,
Over the past two years, we have put vital emphasis on constructing Spotify into a very nice and sustainable enterprise – one designed to attain our purpose of being the world’s main audio firm and one that can persistently drive profitability and development into the longer term. Whereas we have made worthy strides, as I’ve shared many instances, we nonetheless have work to do. Financial development has slowed dramatically and capital has turn out to be costlier. Spotify shouldn’t be an exception to those realities.
This brings me to a choice that can imply a major step change for our firm. To align Spotify with our future objectives and guarantee we’re right-sized for the challenges forward, I’ve made the tough resolution to cut back our whole headcount by roughly 17% throughout the corporate. I acknowledge it will affect quite a lot of people who’ve made useful contributions. To be blunt, many good, proficient and hard-working individuals shall be departing us.
For these leaving, we’re a greater firm due to your dedication and arduous work. Thanks for sharing your abilities with us. I hope you already know that your contributions have impacted greater than half a billion individuals and hundreds of thousands of artists, creators, and authors world wide in profound methods.
I understand that for a lot of, a discount of this measurement will really feel surprisingly massive given the latest constructive earnings report and our efficiency. We debated making smaller reductions all through 2024 and 2025. But, contemplating the hole between our monetary purpose state and our present operational prices, I made a decision {that a} substantial motion to rightsize our prices was the most suitable choice to perform our aims. Whereas I’m satisfied that is the correct motion for our firm, I additionally perceive will probably be extremely painful for our workforce.
To know this resolution, I believe it is very important assess Spotify with a transparent, goal lens. In 2020 and 2021, we took benefit of the chance introduced by lower-cost capital and invested considerably in workforce enlargement, content material enhancement, advertising, and new verticals. These investments typically labored, contributing to Spotify’s elevated output and the platform’s sturdy development this previous yr. Nevertheless, we now discover ourselves in a really completely different surroundings. And regardless of our efforts to cut back prices this previous yr, our price construction for the place we should be remains to be too massive.
After we look again on 2022 and 2023, it has actually been spectacular what we have now achieved. However, on the identical time, the truth is far of this output was linked to having extra sources. By most metrics, we had been extra productive however much less environment friendly. We should be each. Whereas we have now completed some work to mitigate this problem and turn out to be extra environment friendly in 2023, we nonetheless have a methods to go earlier than we’re each productive and environment friendly. At present, we nonetheless have too many individuals devoted to supporting work and even doing work across the work moderately than contributing to alternatives with actual affect. Extra individuals should be centered on delivering for our key stakeholders – creators and shoppers. In two phrases, we have now to turn out to be relentlessly resourceful.
I do know you’ll all be troubled to listen to the subsequent steps about how this course of will work. If you’re an impacted worker, you’ll obtain a calendar invite inside the subsequent two hours from HR for a one-on-one dialog. These conferences will happen earlier than the tip of the day on Tuesday, and whereas Katarina will present extra element on the entire specifics, please know the next will apply to all of those bandmates:
- Severance pay: We’ll begin with a baseline for all workers, with the typical worker receiving roughly 5 months of severance. This shall be calculated based mostly on native discover interval necessities and worker tenure.
- PTO: All accrued and unused trip shall be paid out to any departing worker.
- Healthcare: We’ll proceed to cowl healthcare for workers throughout their severance interval.
- Immigration assist: For workers whose immigration standing is linked with their employment, HRBPs are working with every impacted particular person in live performance with our mobility workforce.
- Profession Help: All workers shall be eligible for outplacement providers for 2 months.
For the workforce that can stay at Spotify, I do know this resolution shall be tough for a lot of. Please know we’re centered on treating our impacted colleagues with the respect and compassion they deserve.
Trying Forward
The choice to cut back our workforce measurement is a tough however essential step in the direction of forging a stronger, extra environment friendly Spotify for the longer term. Nevertheless it additionally highlights that we have to change how we work. In Spotify’s early days, our success was arduous received. We had restricted sources and needed to take advantage of each asset. Our ingenuity and creativity had been what set us aside. As we have grown, we have moved too distant from this core precept of resourcefulness.
The Spotify of tomorrow should be outlined by being relentlessly resourceful within the methods we function, innovate, and deal with issues. This type of resourcefulness transcends the fundamental definition – it is about getting ready for our subsequent part, the place being lean isn’t just an choice however a necessity.
Embracing this leaner construction can even enable us to take a position our income extra strategically again into the enterprise. With a extra focused method, each funding and initiative turns into extra impactful, providing higher alternatives for achievement. This isn’t a step again; it is a strategic reorientation. We’re nonetheless dedicated to investing and making daring bets, however now, with a extra centered method, making certain Spotify’s continued profitability and talent to innovate. Lean doesn’t suggest small ambitions; it means smarter, extra impactful paths to attain them.
At present is a tough however essential day for the corporate. To be very clear, my dedication to our mission and perception in our potential to attain it has by no means been stronger. I hope you’ll be a part of me on Wednesday for Unplugged to debate how we transfer ahead collectively. A discount of this measurement will make it mandatory to alter the best way we work, and we’ll share way more about what it will imply within the days and weeks forward. Simply as 2023 marked a brand new chapter for us, so will 2024 as we construct a good stronger Spotify.
– Daniel
