Typically, when CEOs communicate such news, they deploy a delicate touch.
In an internal memo obtained by Business Insider’s Jyoti Mann, Ek complained (emphasis added):
“By most metrics, we were more productive but less efficient. We need to be both. While we have done work to mitigate this challenge and become more efficient in 2023, we still have a way to go before we are both productive and efficient. Today we still have too many people dedicated to supporting work and even working around work rather than contributing to opportunities that have real impact. More people need to focus on delivering to our key stakeholders – creators and consumers. Simply put, we must demonstrate relentless ingenuity. »
Ek argued that Spotify had strayed too far from the “fundamental principle of ingenuity” that prevailed when the company was founded.
“In the early days of Spotify, our success was hard-won,” he said. “We had limited resources and needed to make the most of every asset.”
Later, when announcing Vogel’s departure, Ek was also blunt.
Spotify, he explained, decided it needed a CFO “with a different mix of experience” to try to bring spending “in line with market expectations” while continuing to fund growth. .
Language suggests Ek thinks similarly to CEOs of major US tech companies: Ditch false labor and amateurs.
As a reminder: Silicon Valley investor and CEO Keith Rabois attributed brutal layoffs in the tech sector in 2022 to big companies like Google and Meta having an overly bureaucratic and over-recruited staff that only did busy work, i.e. fake work.
European tech workers have not been immune to ongoing layoffs, but their effects have been muted by strengthened labor protections and the fact that talent costs less.
Investors want their year of efficiency
Ek makes its cuts despite the relative strength of Spotify’s finances.
In its latest quarter, the company posted a rare profit of $69 million, following an 11% year-on-year rise in revenue to $3.6 billion. Operating costs also decreased by 13% compared to last year.
In truth, the CEO is also under pressure to cut costs in a particular quarter after costly efforts in newer areas such as audiobooks and podcasts – with exclusive rights to Joe Rogan’s podcast That alone would cost about $200 million.
In February, activist investor ValueAct took a stake in the company and publicly complained that the company Spotify costs had “exploded”.
“Spotify’s superpower combined technical advancements with organizational capabilities – it organized creators and copyright owners to build an entirely new business model that benefited everyone involved,” Mason Morfit, head of ValueAct, was quoted as saying : according to Bloomberg.
“During the boom, it applied those powers to new markets like podcasts, audiobooks, and live chat rooms. Its operating expenses and funding for content exploded. It’s now sorting out that what was built to last and what was built to bubble.”
Mark Zuckerberg — a friend of Ek — presented the 21,000 layoffs at Meta since November last year as a necessary part of his “Year of effectiveness” which aims to get the best out of employees. Who followed vocal pressure to reduce staff by meta-investor Altimeter Capital.
Ek seems to follow the Silicon Valley model.