By Oluwatosin Maliki
Spotify announced on Monday, that it plans to trim its workforce by approximately 17%, as part of cost-cutting measures in response to a notably sluggish economic growth.
This is the company’s second round of layoffs this year, after sacking 6% of its workforce in January, while citing a challenging economic environment.
In October, the music streaming giant posted a rare quarterly operating profit of 32 million euros, compared to a loss of 228 million for the same period a year earlier, on the back of 26% growth in active users for the third quarter.
According to AFP, the Chief executive, Daniel Ek, wrote a letter to employees, which read, “I realise that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance”.
He said that in 2020 and 2021, the company “took advantage of the opportunity presented by lower-cost capital and invested significantly in team expansion, content enhancement, marketing and new verticals.”
“However, we now find ourselves in a very different environment. And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big.”
Quest Times further reports that the podcast Company has pumped money since its launch to fuel growth with expansions into new markets and, in later years, adding exclusive content such as podcasts.
Although since the company started, it has never posted a full-year net profit; it sometimes shares quarterly profits despite its success in the online music market.
Spotify said all affected employees will be informed, “over the next several hours”, as they will receive an average of five months of severance pay, during which time the company will continue to cover their healthcare costs.
In addition, they will also be covered under healthcare benefits during their severance period. All accrued and unused vacation will be paid out to any departing employee, the company noted.
It also promised to assist employees whose immigration status is connected with their employment.