Spotify CEO on Layoffs: ‘Our Cost Structure is Too Big’

Spotify is laying off 17% of its workforce as the streaming audio platform tries to cut costs.

“The Spotify of tomorrow must be defined by being relentlessly resourceful in the ways we operate, innovate and tackle problems,” Daniel Ek, the company’s CEO, said in a message to employees Monday (Dec. 4).

“This kind of resourcefulness transcends the basic definition — it’s about preparing for our next phase, where being lean is not just an option but a necessity.”

The layoffs — Spotify’s third round this year, amounting to about 1,500 people — come weeks after the company reported a quarterly profit. And Ek notes that the company has enjoyed “robust” growth this year following major investments in expanding its team and its content.

“However, we now find ourselves in a very different environment,” he said. “And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big.”

The company, Ek added, has too many staff members “dedicated to supporting work and even doing work around the work,” rather than focusing on “delivering for our key stakeholders — creators and consumers.”

Spotify announced two earlier rounds of layoffs this year, impacting a respective six percent and two percent of its workforce.

A report by the Wall Street Journal in September said the company’s $1 billion investment in podcasts hadn’t paid off, as most of its shows are unprofitable. Last year, Spotify canceled 11 of its podcasts, a move that also led to another series of job cuts.

Spotify reported a surprise profit in October, its first in a year and a half. As PYMNTS wrote at the time, the company gave credit to its strategy of increasing prices and cutting expenses, though its efforts to create a service that resonates with consumers has also played a role.

Earlier this year, Spotify announced price hikes for its subscription plans, resulting in monthly bills increasing by $1 to $2, depending on the plan. In its earnings report, Spotify acknowledged that the “the early effects of price increases” played a significant part in the company’s 11% year-over-year increase in revenue.

Last month, the company expanded its partnership with Google to use artificial intelligence to drive engagement on its platform.

“The collaboration is intended to boost Spotify’s infrastructure, data and analytics, and AI/machine learning capabilities,” PYMNTS wrote at the time. “Specifically, Spotify is looking to parse through its content library more intelligently, to supplement existing metadata, to understand listening patterns for non-musical content such as podcasts, and to spot potentially risky materials.”