Giant music streaming platform, Spotify made an announcement on Monday stating it will lay off 17% of its staff. 17% of Spotify’s workforce is equal 1500 jobs to be cut off.
The purpose of the layoff is to cut down operation cost, says the CEO. Spotify had laid off 800 of its workforce at the beginning of 2023 to date. They laid off 600 employees in January and another 200 in June.
The trend of cutting down on the workforce saw a sudden upward trend amongst tech companies like Amazon, LinkedIn, Facebook and more in the past. It seems the trend is back again.
Amazon and LinkedIn had also announced laying off some of their employees but didn’t give numbers like Spotify did.
Daniel Ek, Spotify CEO made it known in a letter to all of the company’s employees that Spotify employed more in the year 2020/2021. He explained that it was due to the low cost of running the streaming platform at the time compared to now.
According to a report by Reuters.com, Spotify will experience a massive charge of about €130m-€140m because of the layout. This will be recorded in the first and second quarters of 2024.
The streaming platform management had forecasted an operating profit of about €37m. New forcast now stands at an expectation of their operating loss at €93m/€108m in the 4th quarter of 2024.
The CEO of Spotify said the company was more productive but efficiency was lacking. Ek added that the firm needs both. Spotify will inform laid-off employees on Monday. It is also reported that each affected employee of the massive layoff will be duly compensated.
The 1500 people will get up to 5 months severance pay. In addition, their healthcare coverage and vacation pay within the 5 month severance period.
By most metrics, we were more productive but less efficient. We need to be both. We debated making smaller reductions throughout 2024 and 2025. Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives.
Spotify CEO, Daniel Ek – Reuters.com
