Spotify to cut 1,500 jobs in third layoff round this year, shares jump


FILE PHOTO: Small figurines are seen in front of displayed Spotify logo in this illustration taken February 11, 2022. REUTERS/Dado Ruvic/Ilustration/File Photo

STOCKHOLM (Reuters) - Music streaming giant Spotify said on Monday that it will lay off around 1,500 employees, or 17% of its workforce, to bring down costs, after letting 600 of its staff go in January, and 200 more in June.

Its U.S.-listed shares soared about 11% to trade near their two-year high of $200.46 in early trading.

After a round of job cuts at the start of the year by tech companies, some have begun reducing their workforce again, with announcements coming from Amazon to Microsoft-owned LinkedIn.

In a letter to employees, Spotify CEO Daniel Ek said the company hired more in 2020 and 2021 due to the lower cost of capital and while its output has increased, much of it was linked to having more resources.

Spotify will incur about 130 million euros to 145 million euros in charges in the fourth quarter due to the layoffs, the company said, adding that majority of the cash component of the charges will be recorded in the first and second fiscal quarters of 2024.

The firm said it now expects fourth-quarter operating loss between 93 million euros and 108 million euros, compared with its prior forecast of an operating profit of 37 million euros.

Spotify invested more than a billion dollars to build up its podcast business, signed up celebrities such as Kim Kardashian, Prince Harry and Meghan Markle, and expanded its market presence in most countries in the world in its quest to reach a billion users by 2030.

In the third quarter the company swung to a profit, aided by price hikes in its streaming services and growth in subscribers in all regions, and the company forecast that its number of monthly listeners would reach 601 million in the holiday quarter.

Ek told Reuters at that time the company was still focusing on efficiencies to get more out of each dollar.

On Monday, he said a reduction of this size will feel large given the recent positive earnings report and its performance.

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

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.

"We debated making smaller reductions throughout 2024 and 2025," Ek said. "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."

(Reporting by Supantha Mukherjee and Akash Sriram, writing by Anna Ringstrom, editing by Essi Lehto, Terje Solsvik, Louise Heavens and Sharon Singleton)

Follow us on our official WhatsApp channel for breaking news alerts and key updates!

   

Next In Tech News

Moon lander Odysseus mission to be cut short after sideways touchdown
Draft Canada law would force social media companies to quickly remove harmful content
Study: Young Britons increasingly face mental illness
Japan PM Kishida to discuss AI with Meta's Zuckerberg on Tuesday, Fuji TV reports
Bitcoin breaks $57,000 as big buyers circle
There are now two billion 5G-compatible smartphones in circulation
Feeling overwhelmed by notifications? Mindfulness could help
Long-time Biden aide Olivia Dalton to leave for Apple, sources say
Terraform Labs co-founder Do Kwon to miss start of US SEC fraud trial
Expedia to cut about 1,500 jobs globally amid moderating travel demand

Others Also Read