Spotify, an online streaming platform says it will reduce the number of it’s employees by approximately 17% in a bid to cut costs due to slower economic growth.
The music streaming service had earlier in October posted a rare quarterly operating profit of 32 million euros, compared to a loss of 228 million for the same period a year ago, on the back of 26% growth in active user for the third quarter.
In 2017, Spotify had around 3,000 employees more than tripling the figure to around 9,800 at the end of 2022.
The Chief Executive Officer, Daniel Ek in a letter to employees said, “I realise that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance.”
He noted 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.”
“However, we now find ourselves in a very different environment. And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big.”
The company has invested heavily since its launch to fuel growth with expansions into new markets and, in later years, exclusive content such as podcasts. It has invested over one billion dollars into podcasts alone.
Daniel Ek added that, “The decision to reduce our team size is a hard but crucial step towards forging a stronger, more efficient Spotify for the future. But it also highlights that we need to change how we work. In Spotify’s early days, our success was hard won. We had limited resources and had to make the most of every asset. Our ingenuity and creativity were what set us apart. As we’ve grown, we’ve moved too far away from this core principle of resourcefulness.
The Spotify of tomorrow must be defined by being relentlessly resourceful in the ways we operate, innovate, and tackle problems. 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.
Today is a difficult but important day for the company. To be very clear, my commitment to our mission and belief in our ability to achieve it has never been stronger. I hope you will join me on Wednesday for Unplugged to discuss how we move forward together. A reduction of this size will make it necessary to change the way we work, and we will share much more about what this will mean in the days and weeks ahead. Just as 2023 marked a new chapter for us, so will 2024 as we build an even stronger Spotify,” the CEO said.