What just happened? In a memo shared on Spotify's website, CEO Daniel Ek said they have made the decision to reduce their employee base by about six percent across the company. Ek said Spotify has made great strides in improving the speed at which the company operates but added they must also operate with efficiency.

Spotify has become the latest tech company to announce organizational changes resulting in significant job cuts.

Like many others in the tech sector, Spotify grew and invested heavily during the pandemic. Last year, Spotify's operating expenses outpaced revenue growth by 2x. As Ek noted, that is unsustainable over the long-term in any climate but especially so during the current challenging macro environment.

In hindsight, Ek said he was too ambitious in investing ahead of revenue growth. "I take full accountability for the moves that got us here today," Ek said.

All impacted employees will receive severance pay, with the average employee receiving about five months of pay based on things metrics like tenure and local notice period requirements. All accrued and unused vacation time will also be paid out, and departing employees will continue to receive health insurance during their severance period. What's more, all will be eligible for two months of outplacement services to help find a new job while those whose immigration status is connected to their employment will receive support from the HR and mobility teams.

A Spotify spokesperson told The Wall Street Journal the layoffs will impact about 600 employees, and are not targeting a specific department.

Ek also announced a few leadership changes. Most notably, Chief Content and Advertising Officer Dawn Ostroff has decided to leave the company. Under her leadership, Spotify grew its podcast content by 40x and more than doubled revenue generated from its advertising business.

Despite the job cuts, Ek said he is confident that 2023 will be a year filled with a steady stream of innovations unlike anything they have introduced in the last several years. Perhaps Spotify HiFi will finally make its long-awaited debut?

Image credit: Thibault Penin, Eyestetix Studio