Spotify CEO Daniel Ek shocked at damaging impression of shedding 1,500 Spotify workers

The music streamer loved record quarterly profits of €168 million ($179 million) within the first three months of 2024, having fun with double-digit income progress to €3.6 billion ($3.8 billion) within the course of. 

Nonetheless, the corporate did not hit its steerage on profitability and month-to-month lively person progress. 

It didn’t appear to place off buyers, who despatched shares within the group hovering greater than 8% in New York after markets opened Tuesday morning.

Layoffs hit Spotify’s steerage

Nonetheless, as he addressed these buyers following the most recent earnings launch, Ek didn’t shrink back from the obstacles that stopped the streamer from hitting a few of its targets this yr.

Along with surprisingly profitable 2023 progress to check in opposition to and the impacts of falling advertising spend, Ek blamed operational difficulties linked to staffing for the group lacking its earnings goal to start out the yr.

In December, Spotify culled 1,500 jobs, equal to 17% of workers, as a part of an aggressive effectivity drive because the group strived for profitability.

Employees prices for these workers carried a protracted tail, as most employees obtained five-month severance packages after they had been let go in December.

On the identical time, the footprint left behind by these workers was larger than Ek and his executives anticipated.

“Another significant challenge was the impact of December workforce reduction,” Ek stated on an buyers name following Spotify’s Q1 earnings launch.

“Though there’s no query that it was the suitable strategic resolution, it did disrupt our day-to-day operations greater than we anticipated. 

“It took us some time to find our footing, but more than four months into this transition, I think we’re back on track and I expect to continue improving on our execution throughout the year getting us to an even better place than we’ve ever been.” 

Ek didn’t elaborate on what elements of operations had been most affected by the layoffs. 

Layoffs proper resolution?

Again in December because the platform he based confronted persistent losses and a falling share worth, Spotify CEO Ek used a well-trodden path by tech giants to steer the ship round: mass layoffs.

“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 stated in a memo as he introduced he can be reducing his workforce by 17%.

Buyers initially reacted effectively to the information, although skeptical voices requested whether or not the transfer merely put a sticking plaster over harder-to-solve points on the group, significantly its low margins due to the prices of bumper document offers.

Nonetheless, it seems to have labored up to now. Within the 4 months for the reason that layoff bulletins, shares within the group have jumped greater than 60%.

Spotify has additionally just lately proved it is ready to increase costs in a few of its key markets with out seeing a flight of listeners to rival providers like Apple Music. 

Within the long-run, Spotify and Ek additionally stay satisfied the powerful spherical of layoffs has set Spotify up for long-term profitability. 

The obvious collective shock at how that may have an effect on operations within the short-run although, marks a touch of hubris for the newly bullish streaming group.