The company has slightly over 9,800 employees going to the previous earnings report. The 6 percent rep[resents roughly 600 employees who will be affected globally.
EK says the layoffs are part of an organizational restructuring that is aimed at increasing its efficiency, reducing costs, and speeding up decision-making.
He says, in 2022, the growth of Spotify’s OPEX outpaced our revenue growth by 2X. That would have been unsustainable long-term in any climate, but with a challenging macro environment, it would be even more difficult to close the gap. As you are well aware, over the last few months we’ve made a considerable effort to rein in costs, but it simply hasn’t been enough. So while it is clear this path is the right one for Spotify, it doesn’t make it any easier especially as we think about the many contributions these colleagues have made.”
Spotify also fixates the economic downtime after the covid-19 pandemic as one of the reasons for its resizing noting a slowdown in ads revenue during the period.
EK says he was too ambitious in investing beyond Spotify’s revenue growth. “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. 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.”
Affected employees will be informed of the next steps in the next few hours. They will receive an average of five months’ severance whilst the company continues to take care of their health costs during the period.
Dawn Ostroff, head of Content and Business at Spotify is also leaving the company. EK says was instrumental in increasing Spotify’s content by 40X and drove significant innovation in the medium to become the leading music streaming platform.
As part of the change, Spotify will be centralizing the majority of its engineering and product work under Gustav Söderström as Chief Product Officer and the Business Arm under Alex Norstrom. The two will work as co-presidents to support EK in running Spotify.