Spotify to Cut 17% of its Workforce Despite Taylor Swift's $100 Million Year

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Spotify, recently announced its decision to reduce its workforce by 17%, resulting in around 1,500 job cuts. This comes as the third round of layoffs for the company in 2023, despite the booming successes Taylor Swift.

In an email sent to staff, Spotify CEO Daniel Ek said that Spotify was taking “substantial action to rightsize our costs.”

Cutbacks Are to Address "Economic Decline", Says Ek.

In an internal memo shared on Spotify's website, Ek addressed the reasoning behind the cutbacks.

"Over the last two years, we’ve put significant emphasis on building Spotify into a truly great and sustainable business – one designed to achieve our goal of being the world’s leading audio company and one that will consistently drive profitability and growth into the future. While we’ve made worthy strides, as I’ve shared many times, we still have work to do. Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities."

Ek went on to "bluntly" address the reality of the cutbacks.

This brings me to a decision that will mean a significant step change for our company. To align Spotify with our future goals and ensure we are right-sized for the challenges ahead, I have made the difficult decision to reduce our total headcount by approximately 17% across the company. I recognize this will impact a number of individuals who have made valuable contributions. To be blunt, many smart, talented and hard-working people will be departing us.

This decision will affect roughly 1,500 employees to realign its costs and resources to better suit the current economic environment.

While Spotify has demonstrated strong growth and even turned a profit in the third quarter of this year, Ek recognizes the importance of being proactive and adapting to evolving market conditions. By reducing its workforce, Spotify intends to position itself as a financially sound and agile organization that is well-equipped to meet the challenges and opportunities of the streaming industry.

The Average Spotify Employee Will Receive 5 Months of Severance Pay

The announcement came as not only a shock to employees, but customer around the world, as Spotify has become one of the most popular streaming websites, in recent years.

But, despite the booming success of artists like Taylor Swift, raking in a reported $100 million in Spotify streaming earnings alone, the platform has been struggling to keep their stakeholders happy.

"When we look back on 2022 and 2023, it has truly been impressive what we have accomplished. But, at the same time, the reality is much of this output was linked to having more resources. By most metrics, we were more productive but less efficient. We need to be both. While we have done some work to mitigate this challenge and become more efficient in 2023, we still have a ways to go before we are both productive and efficient. Today, we still have too many people dedicated to supporting work and even doing work around the work rather than contributing to opportunities with real impact. More people need to be focused on delivering for our key stakeholders – creators and consumers. In two words, we have to become relentlessly resourceful."

In the internal memo, Ek outlined a list of measures Spotify is taking to ensure a smooth transition for employees, including:

• PTO (Personal Time Off)
• Immigration support
• Career Support
• Severance pay
• Healthcare

The average employee will receive "approximately five months of severance" based on tenure with healthcare being provided during this time as well. Spotify's CHRO, Katarina Berg, will also work with employees with "employment outplacement" for the next 2 months also.

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