Spotify announces layoffs of 17% of employees due to high costs
Spotify CEO Daniel Ek has announced large-scale layoffs in the company. According to him, 17% of the service’s employees will be dismissed. The relevant message was published on the Spotify website.
“To align Spotify with our future goals and ensure we are right-sized for the challenges ahead, I have made the difficult decision to reduce our total headcount by approximately 17% across the company,” he said in his statement.
According to the company’s CEO, in 2020 and 2021, Spotify took advantage of the opportunity “provided by cheap capital.” The company invested heavily, including in expanding its team, improving content, and marketing. These investments have generally worked, but now the service is “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,” Daniel Ek explained.
Employees who will be laid off will receive severance pay for approximately five months. During this period, they will also be covered by health insurance and paid for unused vacation time.
As a reminder, Spotify is preparing to introduce significant changes to its royalty payment model in the first quarter of 2024. Implementation of the plans will allow the company to allocate $1 billion over five years in favor of “legal” artists and rights holders.