Spotify announces third round of layoffs in 2023

The development, disclosed on 4 December by CEO Daniel Ek in a note to employees, marks the third round of job cuts this year, with over 500 jobs slashed globally in January (about 6% of its workforce), followed by a podcast division reduction of 200 positions in June (approximately 2% of the total workforce at that time).

According to the exec, the decision, despite a positive earnings report, stems from a gap between financial goals and operational costs.

Spotify is the world’s most popular audio streaming subscription service with 574 million users, including 226 million Spotify Premium subscribers, in over 180 markets.

“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,” Ek said. “I recognise 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.”

The move aims to strategically invest profits back into the business for greater impact, and the reduction process includes severance pay, accrued vacation payouts, continued healthcare coverage, immigration support and career support for departing employees.

For the remaining team, Ek emphasised the decision’s necessity for a stronger and more efficient company, urging a return to resourcefulness and lean operations.

He also urged a clear, objective assessment of Spotify’s trajectory, noting significant investments in team expansion, content enhancement, marketing, and new verticals in 2020 and 2021.

Reflecting on the accomplishments of 2022 and 2023, Ek recognised that increased productivity was often linked to having more resources, making the company more productive but less efficient. He stressed the need to be both productive and efficient, redirecting focus towards delivering for key stakeholders  –  creators and consumers.

“The Spotify of tomorrow must be defined by being relentlessly resourceful in the ways we operate, innovate, and tackle problems,” Ek noted. “This kind of resourcefulness transcends the basic definition  –  it’s about preparing for our next phase, where being lean is not just an option but a necessity.

“Embracing this leaner structure will also allow us to invest our profits more strategically back into the business. With a more targeted approach, every investment and initiative becomes more impactful, offering greater opportunities for success. This is not a step back, it’s a strategic reorientation. We’re still committed to investing and making bold bets, but now, with a more focused approach, ensuring Spotify’s continued profitability and ability to innovate. Lean doesn’t mean small ambitions – it means smarter, more impactful paths to achieve them.”

Meanwhile, according to Q3 financial results, Premium revenue amounted to €2.9bn ($3bn), reflecting a 16% YoY increase, with a gross margin of 26.4% and an operating income of €32m ($35m). Spotify attributed its Q3 profitability to factors such as an “improvement in podcast trends” and “growth in marketplace activity.”

Following the announcement, Spotify stock (NYSE: SPOT) surged over 10%, marking a remarkable YoY increase of more than 145%, although its growth since 2018 has been around 42%.