Spotify obtained a variety of slack this Monday once they introduced a serious layoff, consisting of about 17% of their workers.

This totaled about 1,500 jobs, and the layoff precipitated their inventory to surge over 7% after the information went reside.

Regardless that the corporate made a revenue of $70.7 million of their third quarter because of doing much less promoting and media positions to fill, they laid off a mass quantity of parents only one week after their annual Spotify Wrapped info dropped to customers.

This additionally wasn’t the primary Spotify layoff from this 12 months. Earlier in 2023, they laid off 6% of their workforce, about 600 workers, and downsized by 2%, about 200 roles. This occurred final June, however apparently they nonetheless wanted to make additional cuts.

In a private letter from Spotify CEO Daniel Ek, he explains:

“Crew,

“Over the past two years, we’ve put vital emphasis on constructing Spotify into a very nice and sustainable enterprise—one designed to attain our aim of being the world’s main audio firm and one that can constantly drive profitability and development into the long run. Whereas we’ve made worthy strides, as I’ve shared many occasions, we nonetheless have work to do. Financial development has slowed dramatically and capital has grow to be costlier. Spotify is just not an exception to those realities.

“This brings me to a choice that can imply a big step change for our firm. To align Spotify with our future targets and guarantee we’re right-sized for the challenges forward, I’ve made the troublesome choice to cut back our complete headcount by roughly 17% throughout the corporate. I acknowledge this may affect quite a few people who’ve made useful contributions. To be blunt, many good, gifted and hard-working individuals can be departing us.

“For these leaving, we’re a greater firm due to your dedication and exhausting work. Thanks for sharing your skills with us. I hope you recognize that your contributions have impacted greater than half a billion individuals and thousands and thousands of artists, creators, and authors around the globe in profound methods.

“I understand that for a lot of, a discount of this dimension will really feel surprisingly giant given the latest constructive earnings report and our efficiency. We debated making smaller reductions all through 2024 and 2025. But, contemplating the hole between our monetary aim state and our present operational prices, I made a decision {that a} substantial motion to rightsize our prices was the most suitable choice to perform our targets. Whereas I’m satisfied that is the precise motion for our firm, I additionally perceive it is going to be extremely painful for our group.

“To know this choice, I feel you will need to assess Spotify with a transparent, goal lens. In 2020 and 2021, we took benefit of the chance introduced by lower-cost capital and invested considerably in group growth, content material enhancement, advertising, and new verticals. These investments typically labored, contributing to Spotify’s elevated output and the platform’s strong development this previous 12 months. Nonetheless, we now discover ourselves in a really totally different surroundings. And regardless of our efforts to cut back prices this previous 12 months, our price construction for the place we have to be remains to be too huge.

“Once we look again on 2022 and 2023, it has actually been spectacular what we’ve got achieved. However, on the similar time, the truth is far of this output was linked to having extra sources. By most metrics, we have been extra productive however much less environment friendly. We have to be each. Whereas we’ve got achieved some work to mitigate this problem and grow to be extra environment friendly in 2023, we nonetheless have a methods to go earlier than we’re each productive and environment friendly. At present, we nonetheless have too many individuals devoted to supporting work and even doing work across the work moderately than contributing to alternatives with actual affect. Extra individuals have to be centered on delivering for our key stakeholders—creators and shoppers. In two phrases, we’ve got to grow to be relentlessly resourceful.

“I do know you’ll all be troubled to listen to the following steps about how this course of will work. In case you are an impacted worker, you’ll obtain a calendar invite inside the subsequent two hours from HR for a one-on-one dialog. These conferences will happen earlier than the tip of the day on Tuesday, and whereas Katarina will present extra element on the entire specifics, please know the next will apply to all of those bandmates:

“Severance pay: We’ll begin with a baseline for all workers, with the typical worker receiving roughly 5 months of severance. This can be calculated based mostly on native discover interval necessities and worker tenure.

“PTO: All accrued and unused trip can be paid out to any departing worker. Healthcare: We’ll proceed to cowl healthcare for workers throughout their severance interval. Immigration help: For workers whose immigration standing is related with their employment, HRBPs are working with every impacted particular person in live performance with our mobility group. Profession Help:  All workers can be eligible for outplacement providers for 2 months.

“For the group that can stay at Spotify, I do know this choice can be troublesome for a lot of. Please know we’re centered on treating our impacted colleagues with the respect and compassion they deserve.

“Trying Forward

“The choice to cut back our group dimension is a tough however essential step in direction of forging a stronger, extra environment friendly Spotify for the long run. Nevertheless it additionally highlights that we have to change how we work. In Spotify’s early days, our success was exhausting gained. We had restricted sources and needed to take advantage of each asset. Our ingenuity and creativity have been what set us aside. As we’ve grown, we’ve moved too far-off from this core precept of resourcefulness.

“The Spotify of tomorrow have to be outlined by being relentlessly resourceful within the methods we function, innovate, and deal with issues. This sort of resourcefulness transcends the essential definition – it’s about getting ready for our subsequent part, the place being lean isn’t just an choice however a necessity.

“Embracing this leaner construction will even permit us to speculate our earnings extra strategically again into the enterprise. With a extra focused method, each funding and initiative turns into extra impactful, providing better alternatives for achievement. This isn’t a step again; it’s a strategic reorientation. We’re nonetheless dedicated to investing and making daring bets, however now, with a extra centered method, guaranteeing Spotify’s continued profitability and talent to innovate. Lean doesn’t imply small ambitions; it means smarter, extra impactful paths to attain them.

“At present is a troublesome however essential day for the corporate. To be very clear, my dedication to our mission and perception in our capability to attain it has by no means been stronger. I hope you’ll be a part of me on Wednesday for Unplugged to debate how we transfer ahead collectively. A discount of this dimension will make it essential to vary the best way we work, and we’ll share rather more about what this may imply within the days and weeks forward. Simply as 2023 marked a brand new chapter for us, so will 2024 as we construct a good stronger Spotify.

“– Daniel

Regardless of the frankness of this letter, many on the web are calling out the corporate for making huge earnings in comparison with even the largest musicians on the platform, but nonetheless making cuts to the corporate.