Spotify is laying off 17% of employees across the company amid rising capital costs

As an unexpected revelation before the holidays, Spotify’s CEO, Daniel Ek, announced in a corporate press statement that the company would be reducing its workforce by 17 percent. He attributes the dismissals to the “forthcoming challenges”, choosing to implement them at once rather than executing smaller cutbacks over a period. Employees impacted by this decision will receive notifications later today, Ek further mentioned.

I realize that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance. We debated making smaller reductions throughout 2024 and 2025. Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to right-size our costs was the best option to accomplish our objectives. While I am convinced this is the right action for our company, I also understand it will be incredibly painful for our team.

Daniel Ek

Ek added that the company experienced significant growth in 2020 and 2021, largely attributed to the reduced capital cost. “These investments were generally successful, leading to an enhancement in Spotify’s output and vigorous growth on the platform last year,” he stated. Despite last year’s downsizing actions — with the company dismissing 6 percent of its employees at the start of 2023 and an additional 2 percent in May — Ek expressed that “our cost structure is still inflated compared to what it needs to be.”

After the previous layoffs, Spotify’s workforce stood at approximately 9,000 people. With the recent reductions, about 1,500 employees are set to lose their jobs (as of 2022, 4,300 of these positions were based in the US). As a mitigating effort, Ek announced that Spotify will provide an average of five months severance, maintain healthcare coverage during that period, and offer immigration and career support.

For the forthcoming stage of the company, Daniel Ek emphasised, being lean is a “necessity, not just an option.” Last month, Spotify unveiled its revamped royalty model designed to provide “working artists” with a larger share while simultaneously decreasing fraudulent streams.

Despite its constant struggle for profitability—with the last quarter being a rare outlier—Spotify has consistently grown since its inception, boasting a 26 percent increase over the same period last year, with 574 million monthly active users now. As for the implications of these changes, Ek assured further details “in the coming days and weeks” — a small consolation for employees facing unexpected unemployment just before the holidays.