Spotify CEO Daniel Ek just had to break some devastating Christmas-season news to Spotify employees, letting nearly 20% of them know that they had been laid off as the company attempts to slash headcount to cut its way toward profitability heading into the new year. While understandable, it shows the notoriously unprofitable technology companies might be having to restructure a bit and claw their way to profitability as economic conditions change and investors get tired of unprofitability.
Ek announced the mass layoffs in a letter to Spotify staff in which he congratulated everyone on their hard work and then explained why the cuts are occurring despite the company having made some strides, pointing both toward the generally declining economic environment and the increasing cost of capital, which was likely a reference to rising debt rates.
Beginning the letter, Ek noted that Spotify is in a generally good position but the economic situation isn’t great, saying, “Over the last two years, we’ve put significant emphasis on building Spotify into a truly great and sustainable business – one designed to achieve our goal of being the world’s leading audio company and one that will consistently drive profitability and growth into the future. While we’ve made worthy strides, as I’ve shared many times, we still have work to do. Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities.”
Continuing, he got to the bad news, which is that headcount has to be slashed. And here, slashed really means slashed, as Ek said Spotify is cutting about 17% of its headcount, so likely about 1,500 people. Explaining that, he said, “This brings me to a decision that will mean a significant step change for our company. To align Spotify with our future goals and ensure we are right-sized for the challenges ahead, I have made the difficult decision to reduce our total headcount by approximately 17% across the company. I recognize this will impact a number of individuals who have made valuable contributions. To be blunt, many smart, talented and hard-working people will be departing us.”
Later in the letter Ek claimed that smaller cuts to the workforce wouldn’t have cut it, as though Spotify is going ok, there is a substantial gap between its current position and profitability, making major cuts necessary. He said, “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 rightsize our costs was the best option to accomplish our objectives.”
Then, after elaborating on how the changing economic situation and changing cost of capital made the cuts necessary for the company, Ek explained how he hopes the new workforce model will work for Spotify, saying, “Embracing this leaner structure will also allow us to invest our profits more strategically back into the business. With a more targeted approach, every investment and initiative becomes more impactful, offering greater opportunities for success. This is not a step back; it’s a strategic reorientation. We’re still committed to investing and making bold bets, but now, with a more focused approach, ensuring Spotify’s continued profitability and ability to innovate. Lean doesn’t mean small ambitions; it means smarter, more impactful paths to achieve them.”
Ek famously refused to silence podcaster Joe Rogan in 2022 after it emerged that the podcast host had used racially insensitive language in some episodes, though never in a way meant to attack or demean, with the Spotify CEO saying he understood why employees were angry but would not take the dramatic step of silencing Rogan.
Speaking on the matter at the time, he said, “While I strongly condemn what Joe has said and I agree with his decision to remove past episodes from our platform, I realize some will want more. And I want to make one point very clear – I do not believe that silencing Joe is the answer.”
By Magnus Höij – https://www.flickr.com/photos/hoij/6481208669/, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=67172465