STOCKHOLM, Dec 4 (Reuters) – Music streaming company Spotify ( SPOT.N ) said on Monday it would lay off 1,500 employees, or 17% of its workforce, and cut costs by another 200 in June.
Its US-listed shares rose about 11% in early trade to trade near a two-year high of $200.46.
After a round of job cuts by tech companies earlier in the year, some are starting to cut their workforce again, with announcements coming from Amazon to Microsoft-owned LinkedIn.
In a letter to employees, Spotify CEO Daniel Ek said the company is hiring more in 2020 and 2021 due to lower capital spending and increased output, much of which is tied to having more resources.
Spotify will take a charge of around 130 million euros to 145 million euros in the fourth quarter due to the layoffs, the company said, with most of the charges booked in the first and second fiscal quarters of 2024.
The company said it expects a fourth-quarter operating loss of between 93 million euros and 108 million euros, compared with an earlier forecast of an operating profit of 37 million euros.
Small figures can be seen in front of the Spotify logo shown in this illustration taken on February 11, 2022. REUTERS/Dado Ruvic/Ilustration/File Photo Obtain licensing rights
Spotify has invested more than a billion dollars to build its podcast business, signing celebrities like Kim Kardashian, Prince Harry and Meghan Markle, and expanding its market presence in most of the world in an effort to reach one billion users by 2030.
The company swung to a profit in the third quarter, helped by higher prices for its streaming services and subscriber growth across all regions, and the company forecast its monthly listenership would reach 601 million in the holiday quarter.
Eck told Reuters at the time that the company was still focused on efficiencies to get the most out of every dollar.
On Monday, he said the cut would be big based on the recent positive earnings report and its performance.
“By most metrics, we were more productive but less efficient. We should have been both,” Eck said.
The company will inform affected employees on Monday. Employees will receive severance pay, vacation pay and health care for five months of the severance period.
“We discussed making smaller reductions throughout 2024 and 2025,” Eck said. “However, given the gap between our financial target level and our current operating costs, I have concluded that the best way to achieve our objectives is to take significant action to realign our costs.”
Reporting by Subantha Mukherjee and Akash Sriram, Writing by Anna Ringstrom, Editing by Essie Lehto, Terje Solsvik, Louise Heavens and Sharon Singleton
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