Widely known music streaming platform, Spotify has announced that the company will go through a major restructuring that will lay off about 1,500 employees which accounts for about 17% of its workforce.
The CEO of Spotify, Daniel Eke explained this new development even after Spotify earnings were positive. Ek said, “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”.
To some in the industry, this is rather shocking as Spotify has recorded significant user growth as they are on the path to have about 100 million users in a highly profitable 2023. The profit from Spotify is estimated to be about 65 million euros ($70.7 million) in the third quarter. However, Daniel Ek emphasized the need to further cut down costs by laying off employees. “We still have too many people dedicated to supporting work and even doing work around the work rather than contributing to opportunities with real impact,” he said.
More relevantly, Spotify’s shares rose to 2.5% in premarket trading on Monday even before exchanges opened in New York. Although, the company shares had closed down 2.4% on Friday at $180.69. Spotify lost significant money because of the terms of licensing agreements with music rights holders. It spent billions of dollars on podcasting to diversify its business model but has since scaled back its investment in original audio series.