Why did Spotify lay off 17% of its employees?

Spotify, the streaming music giant, is taking radical measures to cope with a difficult economic climate by cutting its workforce by around 17%.

Music streaming business Spotify will lay off 17% of its staff, equalling around 1,500 employees, in third round of job cuts in less than a yearhttps://t.co/wZYuVCkLgs

— CNN (@CNN) December 4, 2023

In his message to the company, CEO Daniel Ek explains the decision as a response to the dramatic slowdown in economic growth and the consequent need to reduce operating costs.

This follows two smaller rounds of redundancies last year, with over 600 employees made redundant in January and a further 200 in June.

Despite posting a profit in the third quarter for the first time in over a year, Spotify has succumbed to the pressures experienced by many in the technology sector, announcing a major round of redundancies. The Swedish company, which employs around 9,000 people, plans to shed around 1,500 employees.

2023 #SpotifyWrapped has entered the chat. pic.twitter.com/QANRohMr9i

— Spotify (@Spotify) November 29, 2023

In the face of positive earnings, with a profit of 65 million euros for the period ending September and a subscriber base that grew from 345 million at the end of 2020 to 601 million, the layoffs may seem counter-intuitive. However, Ek stressed the need for change to be both productive and effective, pointing out that despite growth, the company had become less efficient and had strayed from its core principles of innovation and agility.

Employees affected by the redundancies will be informed this week and will receive an average of five months' severance pay, paid vacation and medical cover during the redundancy period.