Spotify to chop 6% of its workforce as tech layoffs proceed

Spotify introduced Monday it is chopping 6% of its international workforce because the music streaming firm contends with a dismal financial atmosphere that has seen customers and advertisers alike restrict their spending.

Spotify has a complete workforce of round 9,800 folks, which implies the cuts influence about 600 staff. In keeping with its LinkedIn profile, the corporate employs 5,400 folks within the U.S. and 1,900 in Sweden.

Shares of Spotify climbed greater than 3% Monday on information of the cost-cutting measures.

Spotify, which relies in Sweden however listed on the New York Inventory Trade, despatched an inner memo to workers Monday asserting the layoffs.

One-on-one conversations with affected staff will start over the following a number of hours, Daniel Ek, Spotify’s CEO, wrote within the notice, which was posted publicly on the corporate’s web site.

“Like many different leaders, I hoped to maintain the sturdy tailwinds from the pandemic and believed that our broad international enterprise and decrease threat to the influence of a slowdown in advertisements would insulate us,” Ek mentioned.

“In hindsight, I used to be too formidable in investing forward of our income development. And because of this, right now, we’re decreasing our worker base by about 6% throughout the corporate.”

Ek mentioned within the notice to staff that he takes “full accountability for the strikes that acquired us right here right now.”

Laid-off staff will obtain a median of 5 months of severance and continued health-care protection, Ek mentioned. Immigration assist can even be accessible for employees whose immigration standing is related with their employment.

The corporate warned in a Securities and Trade Fee submitting that the redundancy payouts would result in roughly €35 million ($38 million) to €45 million of severance-related costs.

Daybreak Ostroff, Spotify’s head of content material, can also be leaving the agency. Ostroff, a former president of Conde Nast Leisure, joined Spotify in 2018 to assist the corporate develop its fledgling promoting and podcasting companies.

In her time at Spotify, Ostroff signed Barack and Michelle Obama’s manufacturing firm Greater Floor Productions to have the previous U.S. president and first girl work on unique podcasts for Spotify. She additionally led the deal to get unique rights to the Joe Rogan present and was liable for negotiating unique podcasting offers with Kim Kardashian, Prince Harry and Meghan Markle.

“Due to her efforts, Spotify grew our podcast content material by 40x, drove important innovation within the medium and have become the main music and podcast service in lots of markets,” Ek mentioned within the memo Monday.

On Friday, Google turned the most recent main tech title to announce layoffs, saying it plans to chop 12,000 staff. Microsoft and Amazon, in the meantime, have additionally introduced layoffs.

Tech companies confronted a reckoning in 2022 as rate of interest hikes from the U.S. Federal Reserve made shares a much less enticing guess for buyers.

In October, Spotify reported total third-quarter income grew 21% to three billion euros, led by development in paid subscribers, whereas ad-supported income climbed 19% to 385 million euros due to its podcasting push. Losses climbed threefold to 228 million euros, which the corporate blamed on headcount development and better promoting prices for development initiatives.

Here is the complete memo Ek despatched to Spotify workers:

Workforce,

As we are saying in our Band Manifesto, change is the one fixed. For that reason, I proceed to reiterate that pace is essentially the most defensible technique a enterprise can have. However pace alone isn’t sufficient. We should additionally function with effectivity. It is these two issues collectively that can gasoline our long-term success. With this in thoughts, I’ve some essential information to share right now.

Whereas we now have made nice progress in bettering pace in the previous couple of years, we’ve not targeted as a lot on bettering effectivity. We nonetheless spend far an excessive amount of time syncing on barely totally different methods, which slows us down. And in a difficult financial atmosphere, effectivity takes on higher significance. So, in an effort to drive extra effectivity, management prices, and pace up decision-making, I’ve determined to restructure our group.

To begin, we’re essentially altering how we function on the prime. To do that, I will probably be centralizing nearly all of our engineering and product work below Gustav as Chief Product Officer and the enterprise areas below Alex as Chief Enterprise Officer. I am glad to say that Gustav and Alex, who’ve been with Spotify for a very long time and have performed nice work, will probably be main these groups as co-presidents, successfully serving to me run the corporate day-to-day. They’re going to let you know extra about what this implies within the coming days, however I am assured that with their management, we’ll have the ability to obtain nice issues for Spotify.

Personally, these adjustments will permit me to get again to the half the place I do my greatest work—spending extra time engaged on the way forward for Spotify—and I can not wait to share extra about all of the issues we now have coming.

As part of this variation, Daybreak Ostroff has determined to depart Spotify. Daybreak has made an amazing mark not solely on Spotify, however on the audio trade total. Due to her efforts, Spotify grew our podcast content material by 40x, drove important innovation within the medium and have become the main music and podcast service in lots of markets. These investments in audio provided new alternatives for music and podcast creators and likewise drove new curiosity within the potential of Spotify’s audio promoting. Due to her work, Spotify was in a position to innovate on the advertisements format itself and greater than double the income of our promoting enterprise to €1.5 billion. We’re enormously grateful for the pivotal position she has performed and want her a lot success. Within the close to time period, Daybreak will assume the position of senior advisor to assist facilitate this transition. Alex will tackle the accountability for the content material, promoting and licensing work going ahead and you may hear extra from him on that.

The necessity to turn out to be extra environment friendly
That brings me to the second replace. As a part of this effort, and to deliver our prices extra in line, we have made the tough however needed choice to scale back our variety of staff.

Over the following a number of hours, one-on-one conversations will happen with all impacted staff. And whereas I imagine this choice is true for Spotify, I perceive that with our historic concentrate on development, lots of you’ll view this as a shift in our tradition. However as we evolve and develop as a enterprise, so should our means of working whereas nonetheless staying true to our core values.

To supply some perspective on why we’re making this choice, in 2022, the expansion of Spotify’s OPEX outpaced our income development by 2X. That might have been unsustainable long-term in any local weather, however with a difficult macro atmosphere, it will be much more tough to shut the hole. As you might be effectively conscious, over the previous couple of months we have made a substantial effort to rein-in prices, nevertheless it merely hasn’t been sufficient. So whereas it’s clear this path is the best one for Spotify, it would not make it any simpler—particularly as we take into consideration the various contributions these colleagues have made.

Like many different leaders, I hoped to maintain the sturdy tailwinds from the pandemic and believed that our broad international enterprise and decrease threat to the influence of a slowdown in advertisements would insulate us. In hindsight, I used to be too formidable in investing forward of our income development. And because of this, right now, we’re decreasing our worker base by about 6% throughout the corporate. I take full accountability for the strikes that acquired us right here right now.

My focus now could be on guaranteeing that each worker is handled pretty as they depart. Whereas Katarina will present extra element on all the specifics across the methods we’re dedicated to supporting these gifted bandmates, the next will apply to all impacted staff:

• Severance pay: We’ll begin with a baseline for all staff with the typical worker receiving roughly 5 months of severance. This will probably be calculated primarily based on native discover interval necessities and worker tenure.
• PTO: All accrued and unused trip will probably be paid out to any departing worker.
• Healthcare: We’ll proceed to cowl healthcare for workers throughout their severance interval.
• Immigration assist: For workers whose immigration standing is related with their employment, HRBPs are working with every impacted particular person in live performance with our mobility group.
• Profession Help: All staff will probably be eligible for outplacement companies for two months.

What’s Subsequent

In nearly all respects, we achieved what we got down to do in 2022 and our total enterprise continues to carry out properly. However 2023 marks a brand new chapter. It is my perception that due to these robust choices, we will probably be higher positioned for the longer term. We’ve formidable objectives and nothing has modified in our dedication to reaching them.

We have come a good distance in our efforts to construct a complete platform for creators of all ranges, however there’s nonetheless a lot to be performed. To really turn out to be the go-to vacation spot for creators, we have to hold bettering our instruments and expertise, discover new methods to assist creators interact with their audiences, develop their careers, and monetize their work.

In reality, our roadmap, with the adjustments we’re making and what we now have deliberate to share at our upcoming Stream On occasion, I am assured that 2023 will probably be a 12 months the place customers and creators will see a gentle stream of improvements in contrast to something we now have launched within the final a number of years. I’ll share extra about these thrilling developments within the coming weeks.

Lastly, I hope you’ll be part of me tomorrow for Unplugged.

And once more, for these of you who’re leaving, I thanks for all the things you’ve got performed for Spotify and want you each future success.

– Daniel

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— CNBC’s Ashley Capoot contributed to this report.