On Jan. 23, as Spotify staff learned of plans to lay off 6 percent of the company, or about 600 people, top podcast executives at the audio giant went into damage-control mode. Most notable among the departures was Dawn Ostroff, the chief content and advertising business officer who was hired in 2018 to build out Spotify’s podcasting ambitions and, as one top dealmaker describes it, “represented Hollywood and talent from a creative perspective” for the Sweden-based company. With Ostroff set to exit and hand over leadership of content to Alex Nörstrom, a business executive who oversaw Spotify’s freemium model, the podcast execs quickly scheduled calls with outside partners, agents and managers to reassure them of Spotify’s commitment to existing deals.
Ostroff’s departure was a surprise to some observers, given that the executive was one of Spotify’s most public-facing leaders, spearheading key presentations to investors, participating in media interviews to talk up Spotify’s podcasting expansion and hosting Hollywood-focused events — including a Feb. 1 pre-Grammys party for women in entertainment. Per securities filings, Ostroff also had the highest salary of Spotify’s C-suite, bringing in $1 million in base salary for a total of $8.8 million in pay during 2021. (Ostroff declined to comment.)
Outside partners concerned about Ostroff’s departure were told that her top lieutenants, Julie McNamara and Max Cutler, would remain in place and continue overseeing original programming and talent partnerships, respectively. Greenlit series were expected to move forward, and business would keep up “as usual” despite the layoffs, multiple people familiar with the conversations tell The Hollywood Reporter.
Internally, senior leadership posted notes on Workplace — a Facebook-like business platform run by Meta — and sent mass emails to their respective teams to discuss the cuts, according to a person familiar with the discussions. On Jan. 24, the day after revealing the layoffs, CEO Daniel Ek led a companywide video call that Spotify staff call “Unplugged” to take questions; Ek attributed the layoffs to Spotify’s ballooning operational expenses and the need to, in corporate speak, seek efficiencies.
The latest pivot at Spotify is partly a recession-era sign of the times and partly growing pains for a company that has made massive expansions in recent years but has yet to become profitable. Though Spotify remains cash-flow positive, the company has spent more than $1 billion on its podcast expansion alone since 2019, making expensive tech and studio acquisitions and striking flashy talent deals for sums previously unheard of in podcasting for such talent as Joe Rogan, Alex Cooper and Dax Shepard. Since 2019, when the company’s podcast expansion began in earnest, Spotify has seen these costs as a necessary evil to help the company grow beyond music, boost advertising, draw in new users and, ultimately, compete with rivals as it seeks the perch as the “world’s No. 1 audio platform,” as Ek once told THR in late 2019.
But that hefty spending is now, in the immediate aftermath, costing employees’ jobs as Spotify plans a leaner, more sustainable future. Though Spotify has not disclosed the exact departments impacted by the cuts, a spreadsheet populated by laid-off employees, and reviewed by THR, appears to show a large portion of the layoffs affecting engineering, product, data and design positions. (Previous cuts have impacted podcasting content teams and talent acquisitions.)
When it comes to podcasts, a former Spotify executive says the company “won’t hesitate on cutting sunk costs,” as evidenced by the “gutting out” of studios like Gimlet and Parcast, which Spotify acquired for about $250 million combined in 2019. In early October, the audio giant canceled 11 shows from the two studios and laid off 38 staff members, according to the studios’ unions.
The former Spotify exec says there’s a sense internally that “people have really lost faith in this idea of picking winners” when it comes to investing in and developing original programming that doesn’t necessarily have A-list talent attached but is still more expensive to produce than a weekly talk show. Instead, licensing an existing popular show like The Joe Rogan Experience or Cooper’s Call Her Daddy, which come built with strong audiences, offers more assurances of success on the advertising and subscriber fronts.
One podcast dealmaker says they expect Spotify to move forward with talent licensing deals, given its more proven success for the company. But the number of high-wattage deals likely will not replicate past years, especially when Spotify will have to foot hefty bills next year as top creators like Rogan and Cooper are due for expensive contract renewals.
“We are committed to building on our success in podcasting and will continue to invest in Originals, Exclusives, and a wide array of creators,” a Spotify spokesperson told THR.
Wall Street, which responded favorably to Spotify’s layoff plan, also will be pressuring the audio giant to follow competitors like Apple and Amazon in raising its subscription prices in the U.S. from $9.99 a month for an individual plan. And analysts at Goldman Sachs, Guggenheim and Bank of America are also calling on Spotify to make good on its June investor-day promises that podcasting will turn a profit in one to two years. (During the investor day, executives said podcasting brought in close to 200 million euros but had a 103 million euro negative impact on gross profit due in part to costs.) “We believe management’s apparent renewed focus on the power of its music offering is the right decision,” analysts at Guggenheim interpreted in a Jan. 24 report. “We believe the structural change reflects a greater focus on path to profitability.”
Spotify will report its fourth-quarter earnings Jan. 31 and may shed more light on the company’s “next chapter,” as Ek described it in his initial message to staff. The company also is moving forward with its March “Stream On” event, which typically showcases product updates and tools for creators. “Philosophically, they’re more focused on being a platform than being a content company,” a second podcast dealmaker says. “The balance of power is moving to Sweden.”
“They do a lot of shots on goal in terms of what they want to be,” the executive at another podcast company adds. “Who knows what they decide to be three months from now.”
A version of this story first appeared in the Jan. 27 issue of The Hollywood Reporter magazine. Click here to subscribe.