Spotify has had multiple rounds of layoffs in 2023, including a 2% reduction affecting around 200 employees in June. Now, the company is set to cut approximately 17 percent of its workforce, amounting to at least 1,500 people. This decision comes despite Spotify reporting a total revenue growth of 11 percent year-on-year, reaching €3.4 billion in the third quarter.
Spotify’s gross margin for Q3 finished above guidance at 26.4 percent. Analysts at Jefferies expect the company to guide to a second-quarter gross margin of about 33.6 percent, with an estimated €75 million in additional revenue from price hikes expected to flow into the second quarter.
CEO Daniel Ek stated, “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 percent across the company.” He emphasized that “being lean is not just an option but a necessity,” indicating a strategic shift towards efficiency.
In addition to workforce reductions, Spotify has been enhancing its platform features. The company rolled out its Exclusive Mode for Windows PCs on March 18, which allows for bit-perfect playback by taking sole control of the computer’s audio device. This feature prevents the operating system from altering sample rates or adjusting volume levels, although it does not improve audio quality beyond the existing 320 kbps Ogg for desktop streaming.
Ek also noted that the decision to reduce team size is a hard but crucial step towards forging a stronger, more efficient Spotify for the future. Observers are closely watching how these changes will impact the company’s operations and overall market position in the coming months.
