In a communication to its workforce, Spotify CEO Daniel Ek announced a significant workforce reduction of 17%, a move aimed at mitigating costs and adapting to a deceleration in growth. Ek highlighted that the company had oversaturated its employee count in 2020 and 2021, during a period of accessible capital and substantial tech company investments.
The workforce reduction, constituting approximately 1,500 jobs, was detailed in an internal email to staff, emphasizing the need to “rightsize” costs in response to the economic shifts. While a Spotify spokesperson declined to specify the exact number of impacted roles, shares of Spotify experienced a 2% increase in U.S. premarket trading following the announcement.
In his memo shared on Spotify’s website, Ek acknowledged the company’s efforts to build a robust and sustainable business in the past two years. However, he underscored the continued work required to achieve Spotify’s goal of becoming the world’s leading audio company, especially in light of a significant economic slowdown and increased capital costs.
The decision follows Spotify’s reporting of a 65 million euros ($70.7 million) profit in the third quarter, attributed to reduced spending on marketing and personnel. Earlier this year, Spotify had implemented subscription plan price increases and diversified its offerings by expanding into podcasts and audiobooks.
This latest round of workforce reductions follows previous cuts undertaken by the company in response to evolving economic conditions. Spotify had previously trimmed 6% of its workforce, approximately 600 employees, at the beginning of the year. Subsequently, in June, the company further downsized with a 2% reduction, equating to around 200 roles. These measures reflect a broader trend observed in growth-oriented tech firms, which have been compelled to streamline operations amidst rising interest rates and a challenging macroeconomic environment.
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