Spotify CEO Announces 6% Layoffs of Its Employee

Muhammad Razief Razqie . January 24, 2023

Picture: Wall Street Journal

Techspace - Spotify will lay off 6 percent of its workforce globally, the company’s CEO Daniel Ek announced in an all-staff memo today. Spotify had just over 9,800 full-time employees as of its last earnings report, meaning today’s layoffs affect more or less 600 staff. Dawn Ostroff, head of content and ads who has been instrumental in growing Spotify’s podcasting business, is also leaving the company.

The layoffs make Spotify the latest tech company to cut its workforce in the midst of a global economic downturn. Google announced plans to cut around 12,000 jobs just last week, following similar layoffs at Amazon, Microsoft, and Meta.

Ek announced the layoffs as part of an organizational restructure, which is aimed at increasing efficiency, reducing costs, and speeding up decision-making. “As part of this effort, and to bring our costs more in line, we’ve made the difficult but necessary decision to reduce our number of employees,” he writes.

Affected employees will be informed “over the next several hours” and will receive an average of five-month severance, during which time the company will continue to cover their healthcare costs.

One of the highest profile departures is content and ad business chief Dawn Ostroff, who Ek credits with increasing Spotify’s podcast content by “40x.” Responsibility for content, advertising, and licensing will now fall to Chief Business Officer Alex Norström.

Although Spotify is the world’s largest music streaming service, it has historically tended to focus on growth rather than turning a profit on a quarterly basis. In recent years it has invested heavily in podcasts and more recently audiobooks in an attempt to drive users onto its platform, and as of its last earnings release Spotify had 195 million premium subscribers and 456 million monthly active users.

The company last year outlined its plans for growth even though investors had been concerned that audio-market opportunities were limited. Mr. Ek said at the time that Spotify was making aggressive investments to grow its business to 10 times its current size.

Spotify also said last year that it expects to raise prices in 2023. The premium service in the U.S. has cost $9.99 a month since 2011 when Spotify was launched in the U.S.

Why Most Tech Companies Have Announced Layoffs in 2023

Picture: NYPost

Companies across the tech industry have announced layoffs, affecting thousands of workers in the first few weeks of 2023.

Sales at top tech firms have retreated from the blistering pace attained during the pandemic when billions across the world were forced into isolation. Customers stuck at home came to rely on delivery services like e-commerce and virtual connections formed through social media and videoconferencing.

Company officials have often cited economic uncertainty and fears of a recession in their job-cutting, cost-cutting decisions. It follows a volatile 2022, which was also marred with layoffs by the thousands across major tech brands.

There are other pandemic-related reasons at play too. Daniel Keum, an assistant professor of management at the Columbia Business School, told Forbes that in the past few years, companies may have resisted laying people off because of the negative attention or cruelness of doing so in the depths of a pandemic. Moreover, firms found it difficult to judge worker performance and hence, may have held off on reducing headcount. Now, as more companies head back to the office, at least on a part-time basis, leadership is considering the cuts it might previously have resisted.

Besides the COVID-19 pandemic, the Russia-Ukraine war is another reason at play for the mass layoffs. The war, now on Day 320, has brought major economic decline globally. Supply chains were disrupted, interest rates and fuel costs rose, headwinds of inflation had picked up, and the world was staring at a recession.

As various tech brands are re-evaluating their structure in this new post-pandemic era, it remains to be seen whether the layoffs will continue or stop in the coming months.

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