Spotify introduced Monday it is slicing 6% of its world workforce because the music streaming firm contends with a depressing financial setting that has seen customers and advertisers alike restrict their spending.

Spotify has a complete workforce of round 9,800 folks, which implies the cuts affect about 600 workers. Based on its LinkedIn profile, the corporate employs 5,400 folks within the U.S. and 1,900 in Sweden.

Shares of Spotify climbed greater than 3% Monday on information of the cost-cutting measures.

Spotify, which relies in Sweden however listed on the New York Inventory Alternate, despatched an inside memo to employees Monday saying the layoffs.

One-on-one conversations with affected workers will start over the following a number of hours, Daniel Ek, Spotify’s CEO, wrote within the word, which was posted publicly on the corporate’s web site.

“Like many different leaders, I hoped to maintain the sturdy tailwinds from the pandemic and believed that our broad world enterprise and decrease danger to the affect of a slowdown in advertisements would insulate us,” Ek mentioned.

“In hindsight, I used to be too formidable in investing forward of our income progress. And for that reason, in the present day, we’re decreasing our worker base by about 6% throughout the corporate.”

Ek mentioned within the word to workers that he takes “full accountability for the strikes that received us right here in the present day.”

Laid-off workers will obtain a mean of 5 months of severance and continued health-care protection, Ek mentioned. Immigration help can even be accessible for staff whose immigration standing is linked with their employment.

The corporate warned in a Securities and Alternate Fee submitting that the redundancy payouts would result in roughly €35 million ($38 million) to €45 million of severance-related expenses.

Daybreak Ostroff, Spotify’s head of content material, can be leaving the agency. Ostroff, a former president of Conde Nast Leisure, joined Spotify in 2018 to assist the corporate develop its fledgling promoting and podcasting companies.

In her time at Spotify, Ostroff signed Barack and Michelle Obama’s manufacturing firm Larger Floor Productions to have the previous U.S. president and first woman work on unique podcasts for Spotify. She additionally led the deal to get unique rights to the Joe Rogan present and was accountable for negotiating unique podcasting offers with Kim Kardashian, Prince Harry and Meghan Markle.

“Due to her efforts, Spotify grew our podcast content material by 40x, drove vital innovation within the medium and have become the main music and podcast service in lots of markets,” Ek mentioned within the memo Monday.

On Friday, Google turned the most recent main tech title to announce layoffs, saying it plans to chop 12,000 workers. Microsoft and Amazon, in the meantime, have additionally introduced layoffs.

Tech companies confronted a reckoning in 2022 as rate of interest hikes from the U.S. Federal Reserve made shares a much less engaging guess for buyers.

In October, Spotify reported total third-quarter income grew 21% to three billion euros, led by progress in paid subscribers, whereas ad-supported income climbed 19% to 385 million euros because of its podcasting push. Losses climbed threefold to 228 million euros, which the corporate blamed on headcount progress and better promoting prices for progress initiatives.

This is the total memo Ek despatched to Spotify employees:

Group,

As we are saying in our Band Manifesto, change is the one fixed. Because of this, I proceed to reiterate that velocity is essentially the most defensible technique a enterprise can have. However velocity alone will not be sufficient. We should additionally function with effectivity. It is these two issues collectively that may gasoline our long-term success. With this in thoughts, I’ve some essential information to share in the present day.

Whereas we now have made nice progress in enhancing velocity in the previous few years, we’ve not centered as a lot on enhancing effectivity. We nonetheless spend far an excessive amount of time syncing on barely completely different methods, which slows us down. And in a difficult financial setting, effectivity takes on higher significance. So, in an effort to drive extra effectivity, management prices, and velocity up decision-making, I’ve determined to restructure our group.

To begin, we’re basically altering how we function on the prime. To do that, I can be centralizing the vast majority of our engineering and product work beneath Gustav as Chief Product Officer and the enterprise areas beneath Alex as Chief Enterprise Officer. I am comfortable to say that Gustav and Alex, who’ve been with Spotify for a very long time and have carried out nice work, can be main these groups as co-presidents, successfully serving to me run the corporate day-to-day. They will let you know extra about what this implies within the coming days, however I am assured that with their management, we’ll be capable of obtain nice issues for Spotify.

Personally, these adjustments will enable me to get again to the half the place I do my finest work—spending extra time engaged on the way forward for Spotify—and I am unable to wait to share extra about all of the issues we now have coming.

As part of this modification, Daybreak Ostroff has determined to depart Spotify. Daybreak has made an incredible mark not solely on Spotify, however on the audio trade total. Due to her efforts, Spotify grew our podcast content material by 40x, drove vital innovation within the medium and have become the main music and podcast service in lots of markets. These investments in audio supplied new alternatives for music and podcast creators and likewise drove new curiosity within the potential of Spotify’s audio promoting. Due to her work, Spotify was capable of innovate on the advertisements format itself and greater than double the income of our promoting enterprise to €1.5 billion. We’re enormously grateful for the pivotal position she has performed and want her a lot success. Within the close to time period, Daybreak will assume the position of senior advisor to assist facilitate this transition. Alex will tackle the accountability for the content material, promoting and licensing work going ahead and you will hear extra from him on that.

The necessity to change into extra environment friendly
That brings me to the second replace. As a part of this effort, and to convey our prices extra in line, we have made the tough however essential choice to cut back our variety of workers.

Over the following a number of hours, one-on-one conversations will happen with all impacted workers. And whereas I imagine this choice is true for Spotify, I perceive that with our historic deal with progress, a lot of you’ll view this as a shift in our tradition. However as we evolve and develop as a enterprise, so should our manner of working whereas nonetheless staying true to our core values.

To supply some perspective on why we’re making this choice, in 2022, the expansion of Spotify’s OPEX outpaced our income progress by 2X. That might have been unsustainable long-term in any local weather, however with a difficult macro setting, it could be much more tough to shut the hole. As you’re effectively conscious, over the previous few months we have made a substantial effort to rein-in prices, but it surely merely hasn’t been sufficient. So whereas it’s clear this path is the precise one for Spotify, it does not make it any simpler—particularly as we take into consideration the various contributions these colleagues have made.

Like many different leaders, I hoped to maintain the sturdy tailwinds from the pandemic and believed that our broad world enterprise and decrease danger to the affect of a slowdown in advertisements would insulate us. In hindsight, I used to be too formidable in investing forward of our income progress. And for that reason, in the present day, we’re decreasing our worker base by about 6% throughout the corporate. I take full accountability for the strikes that received us right here in the present day.

My focus now’s on guaranteeing that each worker is handled pretty as they depart. Whereas Katarina will present extra element on all the specifics across the methods we’re dedicated to supporting these proficient bandmates, the next will apply to all impacted workers:

• Severance pay: We are going to begin with a baseline for all workers with the common worker receiving roughly 5 months of severance. This can be calculated based mostly on native discover interval necessities and worker tenure.
• PTO: All accrued and unused trip can be paid out to any departing worker.
• Healthcare: We are going to proceed to cowl healthcare for workers throughout their severance interval.
• Immigration help: For workers whose immigration standing is linked with their employment, HRBPs are working with every impacted particular person in live performance with our mobility group.
• Profession Assist: All workers can be eligible for outplacement companies for two months.

What’s Subsequent

In nearly all respects, we achieved what we got down to do in 2022 and our total enterprise continues to carry out properly. However 2023 marks a brand new chapter. It is my perception that due to these powerful selections, we can be higher positioned for the longer term. We’ve formidable objectives and nothing has modified in our dedication to reaching them.

We have come a good distance in our efforts to construct a complete platform for creators of all ranges, however there’s nonetheless a lot to be carried out. To really change into the go-to vacation spot for creators, we have to maintain enhancing our instruments and expertise, discover new methods to assist creators have interaction with their audiences, develop their careers, and monetize their work.

In truth, our roadmap, with the adjustments we’re making and what we now have deliberate to share at our upcoming Stream On occasion, I am assured that 2023 can be a 12 months the place customers and creators will see a gradual stream of improvements not like something we now have launched within the final a number of years. I’ll share extra about these thrilling developments within the coming weeks.

Lastly, I hope you’ll be part of me tomorrow for Unplugged.

And once more, for these of you who’re leaving, I thanks for the whole lot you’ve got carried out for Spotify and want you each future success.

– Daniel

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— CNBC’s Ashley Capoot contributed to this report.