Spotify had posted an operating profit of €32 million in Q3 2023, marking the company’s first profitable quarter in two years.
Audio streaming service Spotify is reducing its total headcount by around 17 percent across the company, CEO Daniel Ek said in a note to employees on December 4, in its latest efforts to rein in costs and become “both productive and efficient”
This is atleast the third round of job cuts at the company, and the latest round of layoffs is expected to impact about 1,500 people. This announcement comes after Spotify had posted an operating profit of €32 million in Q3 2023, its first profitable quarter in two years.
“I realize that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance. We debated making smaller reductions throughout 2024 and 2025. Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives” Ek said in the note.
“Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities” he said.
Spotify had previously cut around 600 jobs (6 percent of its global workforce) in January 2023 and around 200 jobs (2 percent of its workforce) in June 2023. The company had also merged its Parcast and Gimlet podcasting studios into a single Spotify Studios unit.
In the note, Ek said that the company’s cost structure is still too big for where they need to be, despite their efforts to reduce costs in the past year. The company was “more productive but less efficient by most metrics” he said.
“While we have done some work to mitigate this challenge and become more efficient in 2023, we still have a ways to go before we are both productive and efficient” Ek said “Today, 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 mentioned that more people need to be focused on delivering for its key stakeholders – creators and consumers.
Going forward, Spotify plans to opt for a leaner structure that will allow the firm to reinvest its profits back into its business in a more strategic manner, Ek said.
“We’re still committed to investing and making bold bets, but now, with a more focused approach, ensuring Spotify’s continued profitability and ability to innovate” he said.
