Earlier as we speak, CEO Daniel Ek shared the next word in regards to the firm’s organizational modifications with all Spotify staff.
Team,
Over the final two years, we’ve put important emphasis on constructing Spotify into a really nice and sustainable enterprise – one designed to attain our aim of being the world’s main audio firm and one that can constantly drive profitability and development into the long run. While we’ve made worthy strides, as I’ve shared many instances, we nonetheless have work to do. Economic development has slowed dramatically and capital has change into dearer. Spotify just isn’t an exception to those realities.
This brings me to a call that can imply a big step change for our firm. To align Spotify with our future objectives and guarantee we’re right-sized for the challenges forward, I’ve made the troublesome resolution to scale back our complete headcount by roughly 17% throughout the corporate. I acknowledge this may influence plenty of people who’ve made worthwhile contributions. To be blunt, many sensible, gifted and hard-working individuals will probably be departing us.
For these leaving, we’re a greater firm due to your dedication and arduous work. Thank you for sharing your abilities with us. I hope you realize that your contributions have impacted greater than half a billion individuals and hundreds of thousands of artists, creators, and authors around the globe in profound methods.
I notice that for a lot of, a discount of this dimension will really feel surprisingly giant given the latest optimistic earnings report and our efficiency. We debated making smaller reductions all through 2024 and 2025. Yet, contemplating the hole between our monetary aim state and our present operational prices, I made a decision {that a} substantial motion to rightsize our prices was the best choice to perform our aims. While I’m satisfied that is the best motion for our firm, I additionally perceive will probably be extremely painful for our group.
To perceive this resolution, I believe it is very important assess Spotify with a transparent, goal lens. In 2020 and 2021, we took benefit of the chance introduced by lower-cost capital and invested considerably in group enlargement, content material enhancement, advertising and marketing, and new verticals. These investments usually labored, contributing to Spotify’s elevated output and the platform’s sturdy development this previous 12 months. However, we now discover ourselves in a really completely different setting. And regardless of our efforts to scale back prices this previous 12 months, our price construction for the place we have to be remains to be too large.
When we glance again on 2022 and 2023, it has really been spectacular what we’ve got achieved. But, on the similar time, the truth is far of this output was linked to having extra sources. By most metrics, we had been extra productive however much less environment friendly. We have to be each. While we’ve got finished some work to mitigate this problem and change into extra environment friendly in 2023, we nonetheless have a methods to go earlier than we’re each productive and environment friendly. Today, we nonetheless have too many individuals devoted to supporting work and even doing work across the work reasonably than contributing to alternatives with actual influence. More individuals have to be centered on delivering for our key stakeholders – creators and customers. In two phrases, we’ve got to change into relentlessly resourceful.
I do know you’ll all be concerned to listen to the following steps about how this course of will work. If you might be an impacted worker, you’ll obtain a calendar invite inside the subsequent two hours from HR for a one-on-one dialog. These conferences will happen earlier than the top of the day on Tuesday, and whereas Katarina will present extra element on all the specifics, please know the next will apply to all of those bandmates:
- Severance pay: We will begin with a baseline for all staff, with the common worker receiving roughly 5 months of severance. This will probably be calculated primarily based on native discover interval necessities and worker tenure.
- PTO: All accrued and unused trip will probably be paid out to any departing worker.
- Healthcare: We will proceed to cowl healthcare for workers throughout their severance interval.
- Immigration assist: For staff whose immigration standing is related with their employment, HRBPs are working with every impacted particular person in live performance with our mobility group.
- Career Support: All staff will probably be eligible for outplacement companies for 2 months.
For the group that can stay at Spotify, I do know this resolution will probably be troublesome for a lot of. Please know we’re centered on treating our impacted colleagues with the respect and compassion they deserve.
Looking Ahead
The resolution to scale back our group dimension is a tough however essential step in direction of forging a stronger, extra environment friendly Spotify for the long run. But it additionally highlights that we have to change how we work. In Spotify’s early days, our success was arduous received. We had restricted sources and needed to benefit from each asset. Our ingenuity and creativity had been what set us aside. As we’ve grown, we’ve moved too far-off from this core precept of resourcefulness.
The Spotify of tomorrow have to be outlined by being relentlessly resourceful within the methods we function, innovate, and deal with issues. This sort of resourcefulness transcends the fundamental definition – it’s about making ready for our subsequent section, the place being lean is not only an possibility however a necessity.
Embracing this leaner construction may even enable us to speculate our earnings extra strategically again into the enterprise. With a extra focused method, each funding and initiative turns into extra impactful, providing larger alternatives for achievement. This just isn’t a step again; it’s a strategic reorientation. We’re nonetheless dedicated to investing and making daring bets, however now, with a extra centered method, guaranteeing Spotify’s continued profitability and skill to innovate. Lean doesn’t imply small ambitions; it means smarter, extra impactful paths to attain them.
Today is a troublesome however vital day for the corporate. To be very clear, my dedication to our mission and perception in our potential to attain it has by no means been stronger. I hope you’ll be part of me on Wednesday for Unplugged to debate how we transfer ahead collectively. A discount of this dimension will make it essential to vary the way in which we work, and we are going to share way more about what this may imply within the days and weeks forward. Just as 2023 marked a brand new chapter for us, so will 2024 as we construct a good stronger Spotify.
– Daniel