Third Spotify Layoff
In a third round of layoffs this year, Spotify plans to reduce costs by about 1,500 workers, CEO Daniel Ek revealed on Monday along with a “significant” change in the company’s strategy.
“Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities,” Daniel Ek wrote in a letter to staff posted to the company’s website.
With tens of millions of users gained through a massive hiring and spending spree, Spotify is hoping to return to its startup roots with these changes, which will hopefully make the company more efficient.
According to Daniel Ek, the company has discussed reducing employment next year and in 2025.
“Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities,” Daniel Ek wrote in a letter to staff posted to the company’s website
Individual meetings with the affected staff will happen by Tuesday’s end, according to Daniel Ek. Workers will typically receive five months’ worth of severance pay.
A Blunt Decision By Spotify
With more than 9,000 workers, Spotify (SPOT) cut more than 500 jobs in January, following a host of tech giants like Microsoft (MSFT) and Amazon (AMZN) in reducing staff numbers as the world economy weakened.
Additionally, 200 workers from Spotify’s podcast division were let go in June.
“To be blunt, many smart, talented and hard-working people will be departing us.”
COVID-19 Hiring Spree
During the Covid-19 pandemic, major tech companies hired a lot of people to meet the demand from businesses and households for services like videoconferencing and online shopping.
However, since then, consumer spending has been negatively impacted by inflation and rising interest rates, which has also made debt and equity funding more expensive. As a result, many of them have announced significant job cuts.
Although Spotify has experienced “robust growth” in the last year, according to Daniel Ek, the company has grown “less efficient” and has abandoned the “resourcefulness” that characterized its early years as a tech start-up.