Spotify is going to reduce its hiring growth rate by 25%, according to an email from CEO Daniel Ek to staff sent Wednesday morning (June 15) — the latest sign the world’s largest music streaming company is increasingly focused on profits in addition to growth.
Spotify expanded its headcount by more than 50% over the last two years from 4,405 at the end of 2019 to 6,617 at the end of 2021. About half of that increase came from research and development, which accounted for roughly 48% of the company’s full-time employees in 2021. The company’s aggressive goals require a larger headcount, but Spotify is scaling back from its previously planned growth.
Ek’s email went on to say Spotify “will continue to hire and grow” and that “we are just going to slow that pace and be a bit more prudent with the absolute level of new hires over the next few quarters,” according to a source within the company. News of Ek’s email was first reported by Bloomberg.
A Spotify spokesperson pointed Billboard to comments Spotify CFO Paul Vogel made at the company’s June 8 Investor Day presentation: “We are clearly aware of the increasing uncertainty regarding the global economy. And while we have yet to see any material impact to our business, we are keeping a close eye on the situation and evaluating our headcount growth in the near term.”
The June 8 presentation aimed to show investors the company can improve margins while working towards its goal of 1 billion global users. Spotify’s investments in podcasting in recent years required upfront cash outlays and large expenses that have outrun revenues. Podcasting gross margins were -57% in 2021, but Spotify believes it can achieve 30-35% in three to five years and 40-50% over the long term.
Spotify’s share price rose 8.1% to $105.96 after the news broke Wednesday (June 15).