Daniel Eck, CEO of streaming platform Spotify, announced today that the company will lay off 17% of its workforce, which equates to more than 1,000 people. In order to close the gap between current operating costs and financial goals, Spotify needs to cut expenses.
Over the past two years, we've worked to build Spotify into a truly great and sustainable business, aiming to achieve our goal of becoming the world's leading audio company, always driving profitability and growth. While we have made commendable progress, as I have shared many times, we still have a lot of work to do. Economic growth has slowed sharply, and capital has become more expensive. Spotify is no exception. This led me to make a decision that meant a huge change for our company. To align Spotify with future goals and ensure we're right-sized for the challenges ahead, I made the difficult decision to cut the total headcount of the company by about 17%.
According to Ek, Spotify hired too many employees in 2020 and 2021, and while this led to an increase in output and company growth, it also made Spotify less efficient and increased operating costs. Spotify has too many people who are "committed to supporting the work" and "working around the work" instead of "contributing to the opportunity for real impact".
Spotify employees affected by this layoff will be notified by December 5. Depending on seniority and local notice period requirements, redundant employees will receive an average of five months of compensation.
In the future, Eck said, Spotify will have to "operate with great tact" because "excellence is not just a choice, it's a necessity." These layoffs will allow the company to "build a stronger Spotify" in 2024.
In the third quarter of 2023, Spotify achieved $3.6 billion in revenue, up from $3.2 billion in the year-ago quarter. Spotify also added 23 million monthly active users and 6 million paid subscribers, which allowed the company to achieve its first profitable quarter in 2023. However, the profit is only 1%.
Spotify is the main competitor to Apple Music, a company that has a long history of what Apple charges through its App Store. This year, Spotify's chief executive, Daniel Eck, urged British lawmakers to pass a bill that would regulate competition in the digital market and prevent Apple from offering and competing on the platform.
The most recent dispute between Apple and Spotify occurred in late 2022, when Apple refused to allow Spotify to add an updated version of audiobook support to its app. Spotify's attempt to lead customers to buy books and listen to them in the app has been met with Apple's actions. Eventually, Spotify was forced to remove all in-app information on how to purchase audiobooks from its ** in order to get approval.