Spotify to cut 1,500 jobs in third layoff in 2023

Current layoff session marks third in 2023 with dispelling 600 employees during the first spell in January and 200 in June

Kate Mills - Dec 05, 2023

A smartphone is seen in front of a screen projection of Spotify logo, in this picture illustration taken April 1, 2018. — Reuters

In a bid to cut down costs, music streaming giant Spotify has announced to lay off around 1,500 employees from the company, nearly 17% of its workforce.

The layoff session marks the third of this year with the firing of 600 of its employees during the first spell of layoffs in January, and then 200 more in June.

The company will start informing affected employees on Monday. Employees will get about five months of severance pay, vacation pay, and healthcare coverage for the severance period, Reuters reported.

In early trading, the US-listed shares of Spotify surged approximately 11%, approaching their two-year peak at $200.46.

This surge follows a trend of job reductions in the tech industry, with announcements from companies like Amazon and Microsoft-owned LinkedIn earlier in the year.

The company experienced significant hiring in 2020 and 2021, benefiting from lower capital costs, said Daniel Ek, Spotify's CEO, in a letter addressed to the employees. Although the company's productivity increased, it was largely due to having more resources, he added.

The company expects the burden of bearing about 130 million euros to 145 euros in the fourth quarter due to the recent layoffs.

As a result, Spotify has adjusted its expectations for the fourth-quarter operating loss to be between 93 million euros and 108 million euros, a significant deviation from the earlier forecast of an operating profit of 37 million euros.

Despite recent success, including a profit in the third quarter driven by price increases in streaming services and subscriber growth, the company is strategically making adjustments.

Spotify had previously invested over a billion dollars in building its podcast business, securing deals with celebrities like Kim Kardashian, Prince Harry, and Meghan Markle.

The company aims to reach a billion users by 2030 and has forecast an increase in monthly listeners to 601 million in the holiday quarter.

The company CEO emphasised the ongoing focus on efficiency during an interview conducted by Reuters, wherein he highlighted the significance of this reduction given the recent positive earnings report and the company's overall performance.

"By most metrics, we were more productive but less efficient. We need to be both," Ek said.