It comes after Spotify reported a 65 million euros ($70.7 million) revenue in the third quarter, citing decrease spend on advertising and marketing and personnel.
Spotify raised costs of its subscription plans earlier this 12 months and has been increasing into podcasts and audio books.
The newest spherical of redundancies follows successive cuts at the agency, which like different growth-oriented tech companies has been pressured to in the reduction of on prices in the final 12 months or so due to greater rates of interest and a worsening macroeconomic backdrop.
Team,
Over the final two years, we have put important emphasis on constructing Spotify into a really nice and sustainable enterprise – one designed to obtain our aim of being the world’s main audio firm and one that may constantly drive profitability and progress into the future. While we have made worthy strides, as I’ve shared many instances, we nonetheless have work to do. Economic progress has slowed dramatically and capital has change into dearer. Spotify isn’t an exception to these realities.
This brings me to a call that may imply a major step change for our firm. To align Spotify with our future targets and guarantee we’re right-sized for the challenges forward, I’ve made the tough choice to scale back our whole headcount by roughly 17% throughout the firm. I acknowledge this may influence a quantity of people who’ve made invaluable contributions. To be blunt, many sensible, proficient and hard-working individuals can be departing us.
For these leaving, we’re a greater firm as a result of of your dedication and exhausting work. Thank you for sharing your abilities with us. I hope you realize that your contributions have impacted greater than half a billion individuals and tens of millions of artists, creators, and authors round the world in profound methods.
I understand that for a lot of, a discount of this dimension will really feel surprisingly giant given the current constructive earnings report and our efficiency. We debated making smaller reductions all through 2024 and 2025. Yet, contemplating the hole between our monetary aim state and our present operational prices, I made a decision {that a} substantial motion to rightsize our prices was the best choice to accomplish our targets. While I’m satisfied that is the proper motion for our firm, I additionally perceive it will likely be extremely painful for our staff.
To perceive this choice, I feel it is necessary to assess Spotify with a transparent, goal lens. In 2020 and 2021, we took benefit of the alternative offered by lower-cost capital and invested considerably in staff growth, content material enhancement, advertising and marketing, and new verticals. These investments typically labored, contributing to Spotify’s elevated output and the platform’s strong progress this previous 12 months. However, we now discover ourselves in a really completely different setting. And regardless of our efforts to scale back prices this previous 12 months, our value construction for the place we want to be remains to be too large.
When we glance again on 2022 and 2023, it has actually been spectacular what we now have achieved. But, at the identical time, the actuality is far of this output was linked to having extra assets. By most metrics, we had been extra productive however much less environment friendly. We want to be each. While we now have finished some work to mitigate this problem and change into extra environment friendly in 2023, we nonetheless have a methods to go earlier than we’re each productive and environment friendly. Today, we nonetheless have too many individuals devoted to supporting work and even doing work round the work quite than contributing to alternatives with actual influence. More individuals want to be centered on delivering for our key stakeholders – creators and customers. In two phrases, we now have to change into relentlessly resourceful.
I do know you’ll all be concerned to hear the subsequent steps about how this course of will work. If you’re an impacted worker, you’ll obtain a calendar invite inside the subsequent two hours from HR for a one-on-one dialog. These conferences will happen earlier than the finish of the day on Tuesday, and whereas Katarina will present extra element on all of the specifics, please know the following will apply to all of these bandmates:
- Severance pay: We will begin with a baseline for all employees, with the common worker receiving roughly 5 months of severance. This can be calculated primarily based on native discover interval necessities and worker tenure.
- PTO: All accrued and unused trip can be paid out to any departing worker.
- Healthcare: We will proceed to cowl healthcare for employees throughout their severance interval.
- Immigration assist: For employees whose immigration standing is related with their employment, HRBPs are working with every impacted particular person in live performance with our mobility staff.
- Career Support: All employees can be eligible for outplacement companies for 2 months.
For the staff that may stay at Spotify, I do know this choice can be tough for a lot of. Please know we’re centered on treating our impacted colleagues with the respect and compassion they deserve.
Looking Ahead
The choice to scale back our staff dimension is a tough however essential step in the direction of forging a stronger, extra environment friendly Spotify for the future. But it additionally highlights that we want to change how we work. In Spotify’s early days, our success was exhausting gained. We had restricted assets and had to make the most of each asset. Our ingenuity and creativity had been what set us aside. As we have grown, we have moved too distant from this core precept of resourcefulness.
The Spotify of tomorrow should be outlined by being relentlessly resourceful in the methods we function, innovate, and deal with issues. This variety of resourcefulness transcends the primary definition – it is about making ready for our subsequent section, the place being lean is not only an choice however a necessity.
Embracing this leaner construction may also permit us to make investments our earnings extra strategically again into the enterprise. With a extra focused strategy, each funding and initiative turns into extra impactful, providing higher alternatives for achievement. This isn’t a step again; it is a strategic reorientation. We’re nonetheless dedicated to investing and making daring bets, however now, with a extra centered strategy, guaranteeing Spotify’s continued profitability and skill to innovate. Lean doesn’t suggest small ambitions; it means smarter, extra impactful paths to obtain them.
Today is a tough however necessary day for the firm. To be very clear, my dedication to our mission and perception in our potential to obtain it has by no means been stronger. I hope you’ll be part of me on Wednesday for Unplugged to talk about how we transfer ahead collectively. A discount of this dimension will make it needed to change the means we work, and we’ll share rather more about what this may imply in the days and weeks forward. Just as 2023 marked a brand new chapter for us, so will 2024 as we construct a good stronger Spotify.
– Daniel