Tag: efficiency

An Update on December 2023 Organizational Changes

December 4, 2023

Earlier today, CEO Daniel Ek shared the following note about the company’s organizational changes with all Spotify employees.

Team, 

Over the last two years, we’ve put significant emphasis on building Spotify into a truly great and sustainable business – one designed to achieve our goal of being the world’s leading audio company and one that will consistently drive profitability and growth into the future. While we’ve made worthy strides, as I’ve shared many times, we still have work to do. Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities.

This brings me to a decision that will mean a significant step change for our company. To align Spotify with our future goals and ensure we are right-sized for the challenges ahead, I have made the difficult decision to reduce our total headcount by approximately 17% across the company. I recognize this will impact a number of individuals who have made valuable contributions. To be blunt, many smart, talented and hard-working people will be departing us.

For those leaving, we’re a better company because of your dedication and hard work. Thank you for sharing your talents with us. I hope you know that your contributions have impacted more than half a billion people and millions of artists, creators, and authors around the world in profound ways. 

I realize that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance. We debated making smaller reductions throughout 2024 and 2025. Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives. While I am convinced this is the right action for our company, I also understand it will be incredibly painful for our team. 

To understand this decision, I think it is important to assess Spotify with a clear, objective lens. In 2020 and 2021, we took advantage of the opportunity presented by lower-cost capital and invested significantly in team expansion, content enhancement, marketing, and new verticals. These investments generally worked, contributing to Spotify’s increased output and the platform’s robust growth this past year. However, we now find ourselves in a very different environment. And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big.

When we look back on 2022 and 2023, it has truly been impressive what we have accomplished. But, at the same time, the reality is much of this output was linked to having more resources. By most metrics, we were more productive but less efficient. We need to be both. While we have done some work to mitigate this challenge and become more efficient in 2023, we still have a ways to go before we are both productive and efficient. 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. More people need to be focused on delivering for our key stakeholders – creators and consumers. In two words, we have to become relentlessly resourceful.

I know you will all be anxious to hear the next steps about how this process will work. If you are an impacted employee, you will receive a calendar invite within the next two hours from HR for a one-on-one conversation. These meetings will take place before the end of the day on Tuesday, and while Katarina will provide more detail on all of the specifics, please know the following will apply to all of these bandmates:

  • Severance pay: We will start with a baseline for all employees, with the average employee receiving approximately five months of severance. This will be calculated based on local notice period requirements and employee tenure.
  • PTO: All accrued and unused vacation will be paid out to any departing employee.
  • Healthcare: We will continue to cover healthcare for employees during their severance period. 
  • Immigration support: For employees whose immigration status is connected with their employment, HRBPs are working with each impacted individual in concert with our mobility team. 
  • Career Support:  All employees will be eligible for outplacement services for two months.

For the team that will remain at Spotify, I know this decision will be difficult for many. Please know we are focused on treating our impacted colleagues with the respect and compassion they deserve.

Looking Ahead

The decision to reduce our team size is a hard but crucial step towards forging a stronger, more efficient Spotify for the future. But it also highlights that we need to change how we work. In Spotify’s early days, our success was hard won. We had limited resources and had to make the most of every asset. Our ingenuity and creativity were what set us apart. As we’ve grown, we’ve moved too far away from this core principle of resourcefulness. 

The Spotify of tomorrow must be defined by being relentlessly resourceful in the ways we operate, innovate, and tackle problems. This kind of resourcefulness transcends the basic definition – it’s about preparing for our next phase, where being lean is not just an option but a necessity.

Embracing this leaner structure will also allow us to invest our profits more strategically back into the business. With a more targeted approach, every investment and initiative becomes more impactful, offering greater opportunities for success. This is not a step back; it’s a strategic reorientation. We’re still committed to investing and making bold bets, but now, with a more focused approach, ensuring Spotify’s continued profitability and ability to innovate. Lean doesn’t mean small ambitions; it means smarter, more impactful paths to achieve them. 

Today is a difficult but important day for the company. To be very clear, my commitment to our mission and belief in our ability to achieve it has never been stronger. I hope you will join me on Wednesday for Unplugged to discuss how we move forward together. A reduction of this size will make it necessary to change the way we work, and we will share much more about what this will mean in the days and weeks ahead. Just as 2023 marked a new chapter for us, so will 2024 as we build an even stronger Spotify. 

– Daniel

An Update on Changes to Spotify’s Podcast Business, June 2023

June 5, 2023

Below is an adaptation of an internal update on Spotify’s Podcast Business from Sahar Elhabashi, VP, Head of Podcast Business.

In early 2019, we saw an opportunity to invest in the small but rapidly growing podcasting space, and since then, we have helped transform the industry…

  • Spotify is now the most-used audio podcast platform in most corners of the world and is also the No. 1 podcast publisher in the U.S. 
  • There are now more than 100 million Podcast listeners on Spotify (10x growth)
  • Since we entered the space, over half a billion people have listened to a podcast on Spotify
  • Consumption has grown more than 1,400%
  • Podcast content has increased from 200,000 titles to over 5 million shows on Spotify 
  • 165 of Spotify’s Original and Licensed shows hit #1 on our charts across 99 markets in 2022 
  • Podcast ad revenue experienced high double-digit growth from 2021 to 2022

In addition to fueling a revolution for the medium, this massive group of creators and listeners has also taught us an enormous amount about where podcasting is today and where it is going tomorrow. We know that creators have embraced the global audience on our platform but want improved discovery to help them grow their audience. We also know that they appreciate our tools and creator support programs but want more optionality and flexibility in terms of monetization. Fortunately, Spotify is not a company that ever sits still. 

Given these learnings and our leadership position, we recently embarked on the next phase of our podcast strategy, which is focused on delivering even more value for creators (and users!). This begins with maximizing consumption from the massive audience we’ve established through format innovation and ensuring that more creators in more places achieve success. Simultaneously, in collaboration with the podcasting community, we are broadening our analytics capabilities by expanding Spotify For Podcasters, which will help creators maximize their audience on Spotify and beyond. Underpinning this effort is a continued leveling up of our advertising offerings and the introduction of more business models to help more creators make meaningful money from their work. 

We are expanding our partnership efforts with leading podcasters from across the globe with a tailored approach optimized for each show and creator. This fundamental pivot from a more uniform proposition will allow us to support the creator community better. However, doing so requires adapting; over the past few months, our senior leadership team has worked closely with HR to determine the optimal organization for this next chapter. As a result, we have made the difficult but necessary decision to make a strategic realignment of our group and reduce our global podcast vertical and other functions by approximately 200 people, or 2% of Spotify’s workforce. 

Unfortunately, this means saying goodbye to close colleagues and friends. We know news like this is never easy, especially for those impacted. These decisions are not something we take lightly. I want to express my appreciation for everything those leaving have done for podcasting and Spotify. Those impacted by this change have already received an invite for a 1:1 conversation today with a member of our HR team, and we are focused on ensuring that each step in this process is taken with the utmost empathy and respect. The company will support these individuals with generous severance packages, including extended Healthcare coverage and immediate access to outplacement support. 

Looking ahead, as a key component of our focus on creators, we remain committed to original programming. As part of this next phase, we will be combining Parcast and Gimlet into a renewed Spotify Studios operation that will continue to produce a wide range of high-impact originals, including Stolen, The Journal, Science Vs, Heavyweight, Serial Killers, and Conspiracy Theories. The Ringer will continue to build its unrivaled programming slate across Sports, Culture, and Tech. Furthermore, both studios will greenlight new shows with an increased focus on always-on programming that drives strong, loyal audiences and attracts advertisers. 

Julie McNamara (VP, Head of Global Podcast Studios) will continue to oversee the Spotify Studios organization, with Liliana Kim in charge of Current Content for Spotify Studios alongside Liz Gateley, who will be Head of Development. Bill Simmons will continue as MD of The Ringer and Head of Podcast Innovation and Monetization, working with Julie and me to enhance our monetization opportunities across all our podcasts. We will continue to expand our teams that support creator partnerships under Bryan Thoensen (Head of Content Partnerships) as we increase our focus on the millions of creators building audiences and businesses on our platform. 

Our continued success in growing the podcast ecosystem is predicated on the necessity that the Spotify Machine is always in motion. And with these changes, we will accelerate into the next chapter for podcasts on Spotify with strong discovery and podcast habits for users, thriving monetization and audience growth for creators, and a valuable, high-margin business for Spotify. I want to thank everyone for your continued understanding and collaboration. I firmly believe in this team and that this next phase brings opportunities beyond anything we’ve seen. 

An Update on January 2023 Organizational Changes

January 23, 2023

Spotify logo in white on black background

Earlier today, CEO Daniel Ek shared the following note about the company’s organizational changes with all Spotify employees.

Team, 

As we say in our Band Manifesto, change is the only constant. For this reason, I continue to reiterate that speed is the most defensible strategy a business can have. But speed alone is not enough. We must also operate with efficiency. It’s these two things together that will fuel our long-term success. With this in mind, I have some important news to share today. 

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. 

To start, we are fundamentally changing how we operate at the top. To do this, I will be centralizing the majority of our engineering and product work under Gustav as Chief Product Officer and the business areas under Alex as Chief Business Officer. I’m happy to say that Gustav and Alex, who have been with Spotify for a long time and have done great work, will be leading these teams as co-presidents, effectively helping me run the company day-to-day. They’ll tell you more about what this means in the coming days, but I’m confident that with their leadership, we’ll be able to achieve great things for Spotify.

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. 

As a part of this change, Dawn Ostroff has decided to depart Spotify. Dawn has made a tremendous mark not only on Spotify, but on the audio industry overall. 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. These investments in audio offered new opportunities for music and podcast creators and also drove new interest in the potential of Spotify’s audio advertising. Thanks to her work, Spotify was able to innovate on the ads format itself and more than double the revenue of our advertising business to €1.5 billion. We are enormously grateful for the pivotal role she has played and wish her much success. In the near term, Dawn will assume the role of senior advisor to help facilitate this transition. Alex will take on the responsibility for the content, advertising and licensing work going forward and you’ll hear more from him on that. 

The need to become more efficient

That brings me to the second update. As part of this effort, and to bring our costs more in line, we’ve made the difficult but necessary decision to reduce our number of employees. 

Over the next several hours, one-on-one conversations will take place with all impacted employees. And 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. 

To offer some perspective on why we are making this decision, in 2022, the growth of Spotify’s OPEX outpaced our revenue growth by 2X. That would have been unsustainable long-term in any climate, but with a challenging macro environment, it would be even more difficult to close the gap. As you are well aware, over the last few months we’ve made a considerable effort to rein-in costs, but it simply hasn’t been enough. So while it is clear this path is the right one for Spotify, it doesn’t make it any easier—especially as we think about the many contributions these colleagues have made. 

Like many other leaders, I hoped to sustain the strong tailwinds from the pandemic and believed that our broad global business and lower risk to the impact of a slowdown in ads would insulate us. In hindsight, I was too ambitious in investing ahead of our revenue growth. And for this reason, today, we are reducing our employee base by about 6% across the company. I take full accountability for the moves that got us here today.

My focus now is on ensuring that every employee is treated fairly as they depart. While Katarina will provide more detail on all of the specifics around the ways we are committed to supporting these talented bandmates, the following will apply to all impacted employees:

  • Severance pay: We will start with a baseline for all employees with the average employee receiving approximately 5 months of severance. This will be calculated based on local notice period requirements and employee tenure.
  • PTO: All accrued and unused vacation will be paid out to any departing employee.
  • Healthcare: We will continue to cover healthcare for employees during their severance period. 
  • Immigration support: For employees whose immigration status is connected with their employment, HRBPs are working with each impacted individual in concert with our mobility team. 
  • Career Support:  All employees will be eligible for outplacement services for 2 months.

What’s Next

In almost all respects, we accomplished what we set out to do in 2022 and our overall business continues to perform nicely. But 2023 marks a new chapter. It’s my belief that because of these tough decisions, we will be better positioned for the future. We have ambitious goals and nothing has changed in our commitment to achieving them.

We’ve come a long way in our efforts to build a comprehensive platform for creators of all levels, but there’s still much to be done. To truly become the go-to destination for creators, we need to keep improving our tools and technology, explore new ways to help creators engage with their audiences, grow their careers, and monetize their work. 

In fact, looking at our roadmap, with the changes we are making and what we have planned to share at our upcoming Stream On event, I’m confident that 2023 will be a year where consumers and creators will see a steady stream of innovations unlike anything we have introduced in the last several years. I will share more about these exciting developments in the coming weeks. 

Finally, I hope you will join me tomorrow for Unplugged. 

And again, for those of you who are leaving, I thank you for everything you’ve done for Spotify and wish you every future success. 

– Daniel