Spotify to chop 6% of its workforce as tech layoffs proceed
Spotify introduced Monday it is reducing 6% of its world workforce because the music streaming firm contends with a dismal financial atmosphere that has seen shoppers and advertisers alike restrict their spending.
Spotify has a complete workforce of round 9,800 folks, which implies the cuts influence about 600 workers. In accordance with its LinkedIn profile, the corporate employs 5,400 folks within the U.S. and 1,900 in Sweden.
Shares of Spotify climbed greater than 3% Monday on information of the cost-cutting measures.
Spotify, which relies in Sweden however listed on the New York Inventory Trade, despatched an inside memo to workers Monday saying the layoffs.
One-on-one conversations with affected workers will start over the subsequent a number of hours, Daniel Ek, Spotify’s CEO, wrote within the notice, which was posted publicly on the corporate’s web site.
“Like many different leaders, I hoped to maintain the sturdy tailwinds from the pandemic and believed that our broad world enterprise and decrease danger to the influence of a slowdown in adverts would insulate us,” Ek stated.
“In hindsight, I used to be too bold in investing forward of our income development. And because of this, at the moment, we’re lowering our worker base by about 6% throughout the corporate.”
Ek stated within the notice to workers that he takes “full accountability for the strikes that obtained us right here at the moment.”
Laid-off workers will obtain a median of 5 months of severance and continued health-care protection, Ek stated. Immigration help will even be obtainable for employees whose immigration standing is related with their employment.
The corporate warned in a Securities and Trade Fee submitting that the redundancy payouts would result in roughly €35 million ($38 million) to €45 million of severance-related fees.
Daybreak Ostroff, Spotify’s head of content material, can be leaving the agency. Ostroff, a former president of Conde Nast Leisure, joined Spotify in 2018 to assist the corporate develop its fledgling promoting and podcasting companies.
In her time at Spotify, Ostroff signed Barack and Michelle Obama’s manufacturing firm Larger Floor Productions to have the previous U.S. president and first girl work on unique podcasts for Spotify. She additionally led the deal to get unique rights to the Joe Rogan present and was accountable for negotiating unique podcasting offers with Kim Kardashian, Prince Harry and Meghan Markle.
“Due to her efforts, Spotify grew our podcast content material by 40x, drove important innovation within the medium and have become the main music and podcast service in lots of markets,” Ek stated within the memo Monday.
On Friday, Google grew to become the newest main tech title to announce layoffs, saying it plans to chop 12,000 workers. Microsoft and Amazon, in the meantime, have additionally introduced layoffs.
Tech companies confronted a reckoning in 2022 as rate of interest hikes from the U.S. Federal Reserve made shares a much less enticing guess for traders.
In October, Spotify reported total third-quarter income grew 21% to three billion euros, led by development in paid subscribers, whereas ad-supported income climbed 19% to 385 million euros because of its podcasting push. Losses climbed threefold to 228 million euros, which the corporate blamed on headcount development and better promoting prices for development initiatives.
Here is the total memo Ek despatched to Spotify workers:
As we are saying in our Band Manifesto, change is the one fixed. Because of this, I proceed to reiterate that velocity is essentially the most defensible technique a enterprise can have. However velocity alone shouldn’t be sufficient. We should additionally function with effectivity. It is these two issues collectively that may gas our long-term success. With this in thoughts, I’ve some necessary information to share at the moment.
Whereas we’ve got made nice progress in enhancing velocity in the previous couple of years, we’ve not targeted as a lot on enhancing effectivity. We nonetheless spend far an excessive amount of time syncing on barely completely different methods, which slows us down. And in a difficult financial atmosphere, effectivity takes on higher significance. So, in an effort to drive extra effectivity, management prices, and velocity up decision-making, I’ve determined to restructure our group.
To begin, we’re basically altering how we function on the high. To do that, I might be centralizing the vast majority of our engineering and product work underneath Gustav as Chief Product Officer and the enterprise areas underneath Alex as Chief Enterprise Officer. I am completely happy to say that Gustav and Alex, who’ve been with Spotify for a very long time and have achieved nice work, might be main these groups as co-presidents, successfully serving to me run the corporate day-to-day. They’re going to let you know extra about what this implies within the coming days, however I am assured that with their management, we’ll have the ability to obtain nice issues for Spotify.
Personally, these modifications will permit me to get again to the half the place I do my finest work—spending extra time engaged on the way forward for Spotify—and I can not wait to share extra about all of the issues we’ve got coming.
As part of this transformation, Daybreak Ostroff has determined to depart Spotify. Daybreak has made an amazing mark not solely on Spotify, however on the audio business total. Due to her efforts, Spotify grew our podcast content material by 40x, drove important innovation within the medium and have become the main music and podcast service in lots of markets. These investments in audio provided new alternatives for music and podcast creators and likewise drove new curiosity within the potential of Spotify’s audio promoting. Due to her work, Spotify was capable of innovate on the adverts format itself and greater than double the income of our promoting enterprise to €1.5 billion. We’re enormously grateful for the pivotal position she has performed and want her a lot success. Within the close to time period, Daybreak will assume the position of senior advisor to assist facilitate this transition. Alex will tackle the accountability for the content material, promoting and licensing work going ahead and you will hear extra from him on that.
The necessity to develop into extra environment friendly
That brings me to the second replace. As a part of this effort, and to carry our prices extra in line, we have made the troublesome however vital determination to cut back our variety of workers.
Over the subsequent a number of hours, one-on-one conversations will happen with all impacted workers. And whereas I imagine this determination is correct for Spotify, I perceive that with our historic give attention to development, a lot of you’ll view this as a shift in our tradition. However as we evolve and develop as a enterprise, so should our means of working whereas nonetheless staying true to our core values.
To supply some perspective on why we’re making this determination, in 2022, the expansion of Spotify’s OPEX outpaced our income development by 2X. That will have been unsustainable long-term in any local weather, however with a difficult macro atmosphere, it could be much more troublesome to shut the hole. As you might be properly conscious, over the previous couple of months we have made a substantial effort to rein-in prices, but it surely merely hasn’t been sufficient. So whereas it’s clear this path is the proper one for Spotify, it does not make it any simpler—particularly as we take into consideration the various contributions these colleagues have made.
Like many different leaders, I hoped to maintain the sturdy tailwinds from the pandemic and believed that our broad world enterprise and decrease danger to the influence of a slowdown in adverts would insulate us. In hindsight, I used to be too bold in investing forward of our income development. And because of this, at the moment, we’re lowering our worker base by about 6% throughout the corporate. I take full accountability for the strikes that obtained us right here at the moment.
My focus now’s on guaranteeing that each worker is handled pretty as they depart. Whereas Katarina will present extra element on all the specifics across the methods we’re dedicated to supporting these gifted bandmates, the next will apply to all impacted workers:
- Severance pay: We’ll begin with a baseline for all workers with the common worker receiving roughly 5 months of severance. This might be calculated primarily based on native discover interval necessities and worker tenure.
- PTO: All accrued and unused trip might be paid out to any departing worker.
- Healthcare: We’ll proceed to cowl healthcare for workers throughout their severance interval.
- Immigration help: For workers whose immigration standing is related with their employment, HRBPs are working with every impacted particular person in live performance with our mobility workforce.
- Profession Assist: All workers might be eligible for outplacement companies for two months.
In nearly all respects, we completed what we got down to do in 2022 and our total enterprise continues to carry out properly. However 2023 marks a brand new chapter. It is my perception that due to these powerful selections, we might be higher positioned for the long run. We’ve got bold objectives and nothing has modified in our dedication to attaining them.
We have come a great distance in our efforts to construct a complete platform for creators of all ranges, however there’s nonetheless a lot to be achieved. To actually develop into the go-to vacation spot for creators, we have to maintain enhancing our instruments and know-how, discover new methods to assist creators interact with their audiences, develop their careers, and monetize their work.
In reality, our roadmap, with the modifications we’re making and what we’ve got deliberate to share at our upcoming Stream On occasion, I am assured that 2023 might be a yr the place shoppers and creators will see a gentle stream of improvements in contrast to something we’ve got launched within the final a number of years. I’ll share extra about these thrilling developments within the coming weeks.
Lastly, I hope you’ll be a part of me tomorrow for Unplugged.
And once more, for these of you who’re leaving, I thanks for every part you have achieved for Spotify and want you each future success.
— CNBC’s Ashley Capoot contributed to this report.