Spotify announced Monday that it would cut nearly a fifth of its workforce, at least the third round of layoffs this year, as it struggles to become consistently profitable after spending aggressively to expand globally. beyond music streaming into areas such as podcasting.
Spotify CEO Daniel Ek wrote in a note to employees posted on the company’s website that the platform now had to be “resized” to account for a “very different environment.” Spotify will lay off around 1,500 people, or 17% of its staff.
“Economic growth has slowed significantly and capital has become more expensive,” Mr. Ek said. “Despite our efforts to reduce costs last year, our cost structure relative to where we need to be is still too high,” added Ek.
Despite being the largest music streaming platform, Spotify has long struggled to be profitable due to the terms of the licensing deals it has with record labels and music publishers. The company has moved into new areas such as podcasting, including buying podcast studios Gimlet for $230 million in 2019 and The Ringer for about $200 million in 2020. It has made expensive deals with well-known figures such as former President Barack Obama and First Lady Michelle. Obama, as well as Prince Harry and his wife Meghan. More recently, the company has expanded into the audiobook space.
These changes helped Spotify attract listeners and subscribers, but were not a financial breakthrough. During the first nine months of 2023, Spotify lost $462 millionmore than double the loss for the same period in 2022.
But the company made a small profit last quarter, the first in more than a year, in what Paul Vogel, its chief financial officer, called at the time a “significant inflection point for the company.” Spotify had 226 million subscribers at the end of September and is on track to add 30 million subscribers for the full year, 50% more than expected in the 2023 outlook. The company recently increased the prices of its subscriptions in more than 50 countries. .
The job cuts are the largest announced by Spotify this year. In June, Spotify cut around 200 jobs, including many related to podcasting. Another 600 employees were laid off in January.
As part of its severance package for the job cuts announced Monday, Spotify said the average employee would receive about five months of severity pay.
