Spotify to shed 6% of workers to cut operational costs

Spotify announced Monday that it would lay off six percent of its employees to cut costs, joining Amazon and Microsoft in downsizing its workforce as the economy shrinks.

Per a report by Bloomberg News, the Swedish-based company will cut 400 employees, who will be given between $38 million and $48 million in severance pay. They will also be granted accumulated and unused paid time off and health insurance.

‘Unsustainable’ growth

In a statement to staff posted on the company’s website, Spotify CEO Daniel Ek claimed full responsibility for the job layoffs, which he described as “difficult but necessary.”

He also explained that the move is a part of a strategy to increase efficiency, control expenses and speed up decision-making.

“Like many other leaders, I hoped to sustain the strong tailwinds from the pandemic and believed that our broad global business and lower risk to the impact of a slowdown in ads would insulate us,” he said.

As part of a restructuring at Spotify, Alex Norström, chief freemium business officer, and Gustav Söderström, director of research and development, will become co-presidents.

According to a business report to investors, Spotify recorded a loss of €228 million ($248 million) in its most recent fiscal quarter through September 30. In addition, its operating costs increased by 65 percent, twice the rate of its revenue last year, which Ek said would be ” unsustainable long-term in any climate.”

“In hindsight, I was too ambitious in investing ahead of our revenue growth. And for this reason, today, we are reducing our employee base by about six percent across the company.”

Daniel Ek, CEO of Spotify

Spotify, a publicly listed company on the New York Stock Exchange, has experienced its share price plummet from an all-time high of $364 in the winter of 2021 to just $99.94 at the close on Monday.

Last week, Microsoft also announced plans to shed five percent of its workforce, cutting off 10,000 employees by late March. Tesla, Robinhood, Snap, Netflix, Stripe, Shopify, Coinbase, Salesforce, Twitter and Meta are among the companies that have cut off an estimated 70,000 tech professionals in the past year.