- 04 Dec 23
Swedish music streaming service Spotify has said today it will reduce the number of its employees by around 17% in a bid to cut costs amid “dramatically” slower economic growth.
Spotify said today that it will lay off around 1,500 employees, or 17% of its headcount, to bring down costs. The announcement comes after what has been a long year of laying off staff members, after letting 600 of its staff go in January, and 200 more in June.
The music streaming giant has been in the news repeatedly as they brought in a controversial new policy of introducing a minimum of 1,000 streams before a track can generate any revenue. This new policy adversely effects the lowest-streaming acts, non-music noise tracks and distributors and labels committing fraud.
Spotify said that the new model to modernise their royalty system would allegedly drive an additional $1 billion toward emerging and professional artists.
In October of 2023, the company posted a rare quarterly operating profit of €32 million, compared to a loss of €228 million for the same period a year earlier, on the back of 26% growth in active users for the third quarter.
Chief executive Daniel Ek wrote in a letter to employees: “I realise that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance,”
He said that in 2020 and 2021, the company “took advantage of the opportunity presented by lower-cost capital and invested significantly in team expansion, content enhancement, marketing and new verticals.”
Many tech companies similarly significantly expanded during the pandemic and shortly after as Work From Home models meant that companies could significantly cut overheads while still expanding staff.
Some have begun reducing their workforce once again, with Ireland having the highest number of tech company layoffs in the EU in 2023 with 40% of the redundancies.
In 2017, the company had around 3,000 staff members, more than tripling the figure to around 9,800 at the end of 2022.
The music streaming platform has said that in spite of efforts to cut costs and increase profits "our cost structure for where we need to be is still too big.”
Spotify has invested heavily since its launch to fuel growth with expansions into new markets and, in recent years, exclusive content such as podcasts, having invested over one billion dollars into podcasts alone.
The latest round of layoffs follows an announcement in January of this year that Spotify was to cut its workforce by 6%, and a further 2% in June.
The company has never posted a full-year net profit and only occasionally quarterly profits despite its success in the online music market.
Daniel Ek has said that this reduction will feel large given what has been an overall positive year for the streaming service.
"By most metrics, we were more productive but less efficient. We need to be both," Ek said.
"We debated making smaller reductions throughout 2024 and 2025, Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives," he concluded.
Spotify is projected to have 601 million monthly listeners in the Christmas quarter.