Spotify is undertaking a broad restructuring amid economic uncertainty, announcing that it is cutting 6% of its headcount to reduce costs.
In addition, CEO Daniel Ek announced a senior management shakeup. Dawn Ostroff, chief content and advertising business officer, is departing Spotify. Two of the company’s top execs — Gustav Söderström and Alex Norström — have been elevated to the position of co-president, reporting to Ek.
The layoffs will eliminate nearly 600 jobs; Spotify most recently reported having 9,800 full-time employees worldwide as of Sept. 30. The company estimated that it will incur approximately €35 million-€45 million in severance-related charges.
“It’s my belief that because of these tough decisions, we will be better positioned for the future,” Ek wrote in a companywide memo Monday. “We have ambitious goals and nothing has changed in our commitment to achieving them.”
Ek, in the memo, wrote, “While we have made great progress in improving speed in the last few years, we haven’t focused as much on improving efficiency. We still spend far too much time syncing on slightly different strategies, which slows us down. And in a challenging economic environment, efficiency takes on greater importance. So, in an effort to drive more efficiency, control costs, and speed up decision-making, I have decided to restructure our organization.”
On the senior management front, Spotify is centralizing most engineering and product work under chief product officer Gustav Söderström and the business areas under chief freemium business officer Alex Norström — each of whom have been named co-presidents, “effectively helping me run the company day-to-day,” Ek said. “Personally, these changes will allow me to get back to the part where I do my best work — spending more time working on the future of Spotify — and I can’t wait to share more about all the things we have coming.”
With Ostroff out, Norström will assume oversight of Spotify’s content, advertising and licensing operations.
Ostroff had joined Spotify in mid-2018, after serving as president of Condé Nast Entertainment, and led an aggressive strategy to boot Spotify’s footprint in the podcasting space with a string of exclusive distribution deals — headlined by its multiyear pact with Joe Rogan — and acquisitions, including of Gimlet, The Ringer, Parcast, ad-tech firm Megaphone, and analytics firms Podsights and Chartable.
Ek praised Ostroff’s tenure at the company. “Dawn has made a tremendous mark not only on Spotify, but on the audio industry overall,” he wrote. “Because of her efforts, Spotify grew our podcast content by 40x, drove significant innovation in the medium and became the leading music and podcast service in many markets.” According to Ek, thanks to Ostroff, Spotify was “able to innovate on the ads format itself and more than double the revenue of our advertising business to €1.5 billion.”
Regarding the 6% headcount reduction, Ek wrote, “while I believe this decision is right for Spotify, I understand that with our historic focus on growth, many of you will view this as a shift in our culture. But as we evolve and grow as a business, so must our way of working while still staying true to our core values.”
Employees who are getting laid off will on average receive about five months’ salary in severance payments, per Ek’s memo. In addition, all unused vacation time will be paid out to any departing employee, and all terminated employees will be eligible for outplacement services for two months.
Spotify is scheduled to report fourth-quarter 2022 financial results on Tuesday, Jan. 31, before the market opens.