Spotify continues to shed employees, announcing Monday its biggest layoff yet. Six percent of its workforce, or about 500 people worldwide, will be laid off as it tries to reach profitability. And Dawn Ostroff, Chief Content and Advertising Business Officer, will leave the company. In addition, CEO Daniel Ek announced several organizational changes that he says are designed to “drive more efficiency, control costs, and speed up decision-making.”
Spotify announced earlier it would hire 25% fewer new employees than previously planned. Then in September it laid-off several podcast editorial employees and contractors. That was followed in October by word several shows would cease production. But Ek now says those moves were not aggressive enough to meet not only their profitability goals, but also a slower advertising market.
“As you are well aware, over the last few months we’ve made a considerable effort to rein-in costs,” Ek said in a memo to staff. “Like many other leaders, I hoped to sustain the strong tailwinds from the pandemic and believed that our broad global business and lower risk to the impact of a slowdown in ads would insulate us. In hindsight, I was too ambitious in investing ahead of our revenue growth.”
Spotify’s operating expenses grew twice as fast as the company’s revenue last year, something that Ek said would have been “unstainable long-term in any climate, but with a challenging macro environment, it would be even more difficult to close the gap.” Impacted employees were being notified Monday.
Employees will be paid severance with the average employee receiving about five months of pay. The audio company will also continue to cover healthcare for employees during their severance period as well as pay out any unused vacation time. All employees will be eligible for outplacement services for two months. As part of the layoffs, Spotify said it expects to incur between $38 million and $48 million in severance-related expenses.
More Decision-Making In Sweden
Beyond a smaller workforce, Ek said Spotify is also restructuring its organization to embrace not only speed of decision-making, but also greater efficiency. He said the company spends “far too much time syncing on slightly different strategies” with executives scattered across several offices. To address that, Los Angeles-based Ostroff will exit and two executives at its Swedish headquarters – Alex Norström, currently Chief Freemium Business Officer, and Gustav Söderström, currently Chief Research & Development Officer, will each take on additional responsibilities. Both execs rise to co-presidents of the company, helping with the day-to-day operational oversight. Norström take on the responsibility for the content, advertising and licensing work going forward, according to Ek.
“These changes will allow me to get back to the part where I do my best work—spending more time working on the future of Spotify—and I can’t wait to share more about all the things we have coming,” he said.
In his memo, Ek also credited Ostroff with helping grow Spotify’s podcast content by 40-fold and using those investments to attract interest in audio advertising as Spotify’s ad business more than doubled to $1.6 billion. “Dawn has made a tremendous mark not only on Spotify, but on the audio industry overall,” Ek said.
A one-time TV news reporter, Ostroff joined Spotify in August 2018. Prior to her role at Spotify, Ostroff served as President of Condé Nast Entertainment. Prior to joining the publishing giant, Ostroff was President of Entertainment for The CW broadcast network and from 2002 to 2006, she was President of the UPN Network. Ostroff earlier led Lifetime Entertainment and held senior roles at 20th Century Fox Television and Michael Jacobs Productions at Disney.
A Culture Shift?
Spotify has been focused on growth at any cost in recent years, spending billions of dollars to build a podcast business alongside its music streaming offering while it also expanded into live audio and audio books and even tested hardware with its short-lived Car Thing. While the layoffs and restructuring may seem like a shift in its corporate culture, Ek said Monday’s moves are still part of its growth strategy.
“I understand that with our historic focus on growth, many of you will view this as a shift in our culture,” he told employees. “But 2023 marks a new chapter. It’s my belief that because of these tough decisions, we will be better positioned for the future. We have ambitious goals and nothing has changed in our commitment to achieving them.”