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Spotify just announced another round of lay-offs, but Wall Street is actually happy about it. The SPOT stock jumped 7.5% today on the news.
CEO Daniel Ek announced the lay-offs today, affecting around 1,500 people (or 17% of the 9,241 workforce). Ek mentioned in a memo to staff that the slowing economic growth and rising costs were the main reasons for the cuts across the board as Spotify seeks profitability.
“Today, 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,” Ek said in the memo. “As we’ve grown, we’ve moved too far away from this core principle of resourcefulness.”
Spotify employees have had a tough 2023—this is the third round of layoffs carried out this year. The cuts began in January when Ek announced Spotify would reduce its headcount by 6% or around 600 employees at the time. Six months later in June, another round of cuts hit the podcast division with Spotify shedding more than 200 positions there. Spotify says the layoffs were necessary after Spotify’s wild growth during the pandemic.
Ek defended his decision to grow the company at such a rapid pace, but now says “we find ourselves in a very different environment.” Those impacted by this latest round of lay-offs will receive five months of severance pay and continued coverage under their healthcare plans. The effort comes as Spotify attempts to become a profitable company by 2024 rather than focused on growth at all costs.
Spotify raised its prices across all of its plans this year, helping it post a quarterly profit as monthly active users (MAUs) rose to 574 million. Spotify Premium subscribers were up 16%, while MAUs have risen 26% compared to the same period last year. Despite the price hikes, Spotify’s MAU growth this quarter was the second largest Q3 increase in the company’s history.