“Economic growth has slowed dramatically” –Daniel Ek, CEO, Spotify
In an internal memo also posted publicly, Spotify CEO Daniel Ek announced the company’s third layoff sweep of 2023. Seventeen percent of the company — about 1,500 employees — will receive severance packages. (More on the packages below.)
Spotify took a similar action, terminating six percent of its company (including the resignation of Podcast head Dawn Ostroff) in January (RAIN coverage HERE)
Two-hundered staffers were released when Spotify merged its Parcast and Gimlet acquisition in June (RAIN coverage HERE.)
“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.” –Daniel Ek
Tone and Reason
The memo takes a blended tone of sympathy without regret, and firm decision making combined with a sharp view of future economics. “This is not a step back; it’s a strategic reorientation,” Ek states. “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.”
Broader economic climates drove the decision. Daniel Ek observed that lower-cost capital before 2023 drove expensive acquisitions, hiring, product development in the service , marketing, and launching new content types like podcasts and audiobooks.
“We now find ourselves in a very different environment,” he observes. “And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big.”
“By most metrics, we were more productive but less efficient. We need to be both.” –Deniel Ek
The Action and Terms
The actual layoff process is resource intensive in at least one way: HR time and energy. Spotify will conduct 1-on-1 affected staff meetings between Monday morning’s announcement and end-of-day Tuesday. That means 1,500 individual severance meetings in two days.
The broad points of the severance agreements are typical of a corporate layoff sweep. Below, Spotify’s language:
- Severance pay: We will start with a baseline for all employees, with the average employee receiving approximately five months of severance. This will be calculated based on local notice period requirements and employee tenure.
- PTO: All accrued and unused vacation will be paid out to any departing employee.
- Healthcare: We will continue to cover healthcare for employees during their severance period.
- Immigration support: For employees whose immigration status is connected with their employment, HRBPs are working with each impacted individual in concert with our mobility team.
- Career Support: All employees will be eligible for outplacement services for two months.
Taking Stock
Unsurprisingly, the topline economic impact is lifting Spotify’s price on the New York Stock Exchange. At the time of this post, SPOT shares had jumped 5.8%.
