Spotify became the latest tech firm to announce a significant downsizing of its workforce yesterday, with a plan to cut about 6% of jobs within the company. This will likely result in up to 600 people departing the business.
In a memo to staff, Spotify boss Daniel Ek said that the firm’s operating expenses have been growing considerately faster than its revenues of late, which would ultimately need to be addressed at anytime, but that need is more urgent in the current economic climate.
There have been various other efforts in recent months to cut costs, he added, but he has reached the conclusion that redundancies are now required. “To bring our costs more in line, we’ve made the difficult but necessary decision to reduce our number of employees”, the memo stated.
“Over the next several hours, one-on-one conversations will take place with all impacted employees. And while I believe this decision is right for Spotify, I understand that with our historic focus on growth, many of you will view this as a shift in our culture. But as we evolve and grow as a business, so must our way of working while still staying true to our core values”.
“To offer some perspective on why we are making this decision”, he went on, “in 2022, the growth of Spotify’s operating expenses outpaced our revenue growth by two times. 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”, he then said. “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”.
“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”, he continued. “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”.
The company-wide downsizing will be accompanied by a restructure at the top of the Spotify business, the main headline of which is the departure of Chief Content & Advertising Business Officer Dawn Ostroff. The teams she has overseen in that role will now fall under the remit of Alex Norström, who becomes Chief Business Officer. Meanwhile, the majority of Spotify’s engineering and product work will now sit under Gustav Söderström, who becomes Chief Product Officer.
On that rejig, Ek wrote: “I’m happy to say that Gustav and Alex, who have been with Spotify for a long time and have done great work, will be leading these teams as co-Presidents, effectively helping me run the company day-to-day. They’ll tell you more about what this means in the coming days, but I’m confident that with their leadership, we’ll be able to achieve great things for Spotify”.
“Dawn has made a tremendous mark not only on Spotify, but on the audio industry overall”, he then added. “Because of her efforts, Spotify grew our podcast content by 40 times, drove significant innovation in the medium and became the leading music and podcast service in many markets. We are enormously grateful for the pivotal role she has played and wish her much success”.
The memo also set out how Spotify plans to support those employees now facing redundancy, and finished with an optimistic rallying call from Ek aimed at those who will remain.
“In almost all respects, we accomplished what we set out to do in 2022 and our overall business continues to perform nicely”, he said. “But 2023 marks a new chapter. It’s my belief that because of these tough decisions, we will be better positioned for the future. We have ambitious goals and nothing has changed in our commitment to achieving them”.
“We’ve come a long way in our efforts to build a comprehensive platform for creators of all levels, but there’s still much to be done”, he went on. “To truly become the go-to destination for creators, we need to keep improving our tools and technology, explore new ways to help creators engage with their audiences, grow their careers, and monetise their work”.
“In fact, looking at our roadmap, with the changes we are making and what we have planned to share at our upcoming Stream On event, I’m confident that 2023 will be a year where consumers and creators will see a steady stream of innovations unlike anything we have introduced in the last several years. I will share more about these exciting developments in the coming weeks”.
The announcement from Spotify follows similarly significant downsizing at many other tech companies in recent months, of course, including Google, Amazon, Microsoft and Meta. In the digital music space more specifically, both SoundCloud and Anghami reduced their headcounts last year.