Spotify cuts 17% jobs amid rising capital costs. Spotify is shedding roughly 1,500 positions, or about 17% of its staff, in its third wave of layoffs this year as the music streaming giant strives to become “both productive and efficient.”
In a statement to staff Monday, Spotify founder and chief executive Daniel Ek said rightsizing the workforce is vital for the firm to confront the “challenges ahead.”
He highlighted the poor economic growth and rising capital costs as reasons for the employment losses, saying the firm took advantage of lower-cost capital in 2020 and 2021 to invest considerably in the business.
“I recognize this will impact a number of individuals who have made valuable contributions. To be candid, many brilliant, capable and hard-working individuals will be departing us,” he wrote in the note, which the company later published on the blog.
Spotify employs roughly 8,800 workers and will tell those impacted later in the day. The next wave of layoffs follows Spotify slashing approximately 6% of staff in June this year and another few hundred employees in January.
Spotify announced robust user growth with a noteworthy jump in monthly active users and paying customers in the most recent quarter. It also outperformed Wall Street’s estimates on operating income, and its outlook for the fourth quarter signals a continuation of this favorable trend.
But despite general strength in user and subscriber counts and management’s declaration that every area exceeded forecasts, growth in North American premium customers was very moderate quarter-over-quarter. There was also a modest year-over-year fall in third-quarter premium average revenue per user (ARPU), with fourth-quarter predictions suggesting sustained difficulty owing to geography and product mix alterations.
“I realize that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance. We contemplated making lower decreases during 2024 and 2025,” wrote Ek.
“Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives.”
Industries globally have witnessed massive layoffs this year, totaling over 225,000 jobs, spurred by economic uncertainty, increasing borrowing rates, and altering consumer trends. The technology industry, including companies such as Amazon, Google, Meta, Twitter, and Netflix, is seeing significant reductions, increasing economic uneasiness among workers.