Music streaming giant Spotify has announced a significant workforce reduction, saying it will lay off 17% of its employees.
According to CNBC, the move is a strategic response to manage costs and align with the company's adjustments for a growth slowdown. In an internal email addressed to the staff, Spotify CEO Daniel Ek conveyed the company's decision to take substantial action to optimize its costs.
Ek acknowledged that Spotify had expanded its workforce significantly during 2020 and 2021, when capital was still cheap and technology companies heavily invested in team expansion.
Latest Round of Layoffs of Spotify
This latest round of layoffs translates to approximately 1,500 jobs, an anonymous source familiar with the matter told CNBC. However, a Spotify spokesperson declined to specify the exact number of roles impacted by the measure.
Ek emphasized the company's commitment to building a sustainable and leading audio business. He acknowledged the progress but noted that economic growth had decelerated significantly, and capital had become more expensive, citing these as prevailing realities affecting Spotify.
Earlier this year, Spotify implemented price increases for its subscription plans and has been diversifying its offerings by venturing into podcasts and audiobooks. The recent workforce reduction follows a series of previous cuts at Spotify, aligning with a broader trend among growth-focused tech companies.
Economic challenges, including higher interest rates and a challenging macroeconomic environment, have prompted many companies to streamline their operations and cut costs.
Wells Fargo analysts provided insights suggesting that Spotify's layoffs indicate the company's ongoing focus on achieving profitability targets rather than a reactionary response to economic headwinds. They also said the move could contribute to a nearly 2% cut in operating expenses by 2024.
Spotify CEO Daniel Ek's Statement
"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," Ek said in the memo.
"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," he added.
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