Spotify makes organizational changes, fires 600 employees

Spotify Technology has made some changes at the executive level and sacked some staff members to lower costs as the economic downturn deepens. According to a note from the company’s CEO and Co-founder, Daniel Ek, Spotify’s current trajectory was unsustainable in the long run.

The streaming giants announced that this layoff round would impact around 6% of its global workforce. In its most recent earnings release, the company said 9,808 full-time employees were working for Spotify.

“Like many other leaders, I hoped to sustain the strong tailwinds from the pandemic and believed that our broad global business and lower risk to the impact of a slowdown in ads would insulate us,”

Spotify co-founder and CEO Daniel Ek

“In hindsight, I was too ambitious in investing ahead of our revenue growth. And for this reason, today, we are reducing our employee base by about 6% across the company. I take full accountability for the moves that got us here today,” he added.

“We still spend far too much time syncing on slightly different strategies, which slows us down. And in a challenging economic environment, efficiency takes on greater importance,” he said.

Other organizational changes at Spotify

There are some adjustments at the helm of the company as well. Dawn Ostroff, the chief content and advertising business officer, will leave the company. Alex Norström will become the only person in charge of the business as Spotify’s new chief business officer — he used to be the chief freemium business officer.

Gustav Söderström, the chief product officer for over a decade, is staying at the company and overseeing most engineering and product work. So it sounds like there isn’t much change on this front.

In his statement, Daniel Ek said, “We are fundamentally changing how we operate at the top. To do this, I will be centralizing the majority of our engineering and product work under Gustav as Chief Product Officer and the business areas under Alex as Chief Business Officer.”

“I’m happy to say that Gustav and Alex, who have been with Spotify for a long time and have done great work, will lead these teams as co-presidents, effectively helping me run the company daily. They’ll tell you more about this in the coming days, but I’m confident that with their leadership, we’ll be able to achieve great things for Spotify.”

“Personally, these changes will allow me to get back to the part where I do my best work—spending more time working on the future of Spotify—and I can’t wait to share more about all the things we have coming.”

This will not be the first time in recent months Spotify is laying off staff members. In October, during the layoff fever that struck several players in the tech ecosystem, Spotify laid off 28 employees from its Gimlet Media and Parcast podcast studios out of its about 9,800 employees, according to its third-quarter earnings report.

Despite adding millions of subscribers in the last year, the music streaming platform had a taste of the economic downturn and recession as it found it hard to grow its profit margin.

According to its Q3 of 2022 report, Spotify had 195 million paid subscribers, up from 188 million paid/premium subscribers in Q2 and above its expectations. However, the music streaming platform’s revenue growth rate of 36% in 2018 declined to 3.7% in 2022.

At the end of 2022, Spotify’s stock also fell to about 70%. This is below some other tech companies’ stock. Although, Meta went down to about 65%, Snap to about 81%, and Netflix to about 53%, according to a report by Digital Music News.

Read also: Microsoft to lay off 10,000 employees before the end of 2023

Spotify and other tech companies on a layoff spree

The layoff announcement is no longer uncommon in the tech ecosystem. 2022 saw many companies terminating employees’ contracts, and the trend appears to have continued in the new year.

In the past, companies that have let go of employees have pointed to the macroeconomic climate, the ongoing rise in inflation, and the anticipated recession as the main reasons for the layoffs. This has compelled major companies to act quickly and prudently to control expenses and boost sales.

However, with the bleak outlook of the economy and the reduced advertising revenues, many tech companies are still looking to lower costs by laying off more of their employees. Businesses that increased their employee base during the pandemic are also looking for ways to reduce it.

The latest company to lay off staff was Alphabet, Google’s parent company. Last week, it reportedly laid off about 12,000 employees, which is 6% of its workforce. Just a few days before that, Microsoft, its rival company, laid off 10,000 employees, which is 5% of its total employee base of over 220,000.

Spotify has made arrangments to have one on one conversations with the departing employees and provide their severance pay, PTO, immigration support, health insurance, and career support.