17% of Spotify employees face the music in latest cost-cutting shuffle

Spotify has announced its third and largest round of layoffs this year, cutting 17 percent of employees despite recently posting its first profitable quarter in more than 12 months.

CEO Daniel Ek made the announcement in a letter to staff today. As mentioned, Q3 2023 was Spotify's first profitable quarter in a while, with the company attributing its €65 million ($70 million) net income largely to reduced operating expenses following layoffs in January and June, and a subscription price hike in July.

January's layoffs affected teams across the company, while June's round eliminated 200 jobs from the podcasting team.

"I realize that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance," Ek said in today's letter to staff. Around 1,500 will be laid off based on Spotify's reported Q3 headcount of 9,241 people.

It's unclear from where in the company staff will be culled – we asked, but Spotify only confirmed that approximately 1,500 jobs were being cut "across markets and functions."

Ek further justified the layoffs by saying there was still a gap "between our financial goal state and our current operational costs," which he further attributed to Spotify's bloated headcount in the wake of mass pandemic hiring, much like other tech companies have done through multiple waves of layoffs this year.

"In 2020 and 2021, we took advantage of the opportunity presented by lower-cost capital and invested significantly in team expansion, content enhancement, marketing, and new verticals," Ek said. "These investments generally worked," the Spotify CEO added, but "our cost structure for where we need to be is still too big."

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Ek admitted that much of Spotify's increased output is "linked to having more resources," i.e. humans doing the work, though at the same time he claimed redundant work is still going on.

"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," Ek said. "We have to become relentlessly resourceful."

In other words, we really got ahead of ourselves with all that hiring, and even though we've got costs under control and much of our growth is thanks to all of you, it's still not enough, so bye.

Of course, for those Spotify employees remaining, it may mean a larger workload. "A reduction of this size will make it necessary to change the way we work, and we will share much more about what this will mean in the days and weeks ahead," Ek said in closing.

The company plans to hold a meeting Wednesday to further discuss its plans with remaining employees.

Spotify staff caught up in this cut will receive an average of five months' severance pay, plus healthcare coverage for their entire severance period.

But why now, when the holiday season is in full swing? "We've taken this action from a position of financial strength, on the best timeline for our organization, while ensuring that the impacted employees were treated respectfully and supported," a Spotify spokesperson told us. ®