Spotify CEO Daniel Ek sure sounds like he's blaming his 1,500 job cuts on fake work and amateur execs

• European tech firms are, by reputation, less ruthless than their US or Chinese peers.
• Spotify's Daniel Ek blew a hole in that with blunt remarks about cutting jobs and losing his CFO.
• Ek complained Spotify had too many people "doing work around the work."

While Spotify's half a billion users enjoyed their Wrapped playlists this week, the Swedish firm's employees were in for less festive news.

Daniel Ek, the streaming giant's CEO, announced early Monday that around 1,500 of the firm's 9,000 people, or about 17% of the global workforce, would be axed.

On Thursday, he followed up with the news the firm was parting ways with chief financial officer Paul Vogel, who was appointed to the job in January 2020 after four years of working in Spotify's investor relations and treasury divisions.

Typically, when CEOs communicate news like this, they deploy a delicate touch.

Ek did not.

In an internal memo obtained by Business Insider's Jyoti Mann, Ek complained (emphasis ours):

"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."

Ek argued that Spotify had moved too far away from the "core principle of resourcefulness" prevalent when he first started the company.

"In Spotify's early days, our success was hard won," he said. "We had limited resources and had to make the most of every asset."

Later, in announcing Vogel's departure, Ek was also blunt.

Spotify, he said, decided it needed a chief financial officer "with a different mix of experiences" in an effort to bring spending "in line with market expectations" while continuing to fund growth.

Ouch!

The language suggests Ek is thinking similarly to Big Tech CEOs in America: Ditch fake work and amateurs.

As a reminder: Silicon Valley investor and CEO Keith Rabois attributed 2022's brutal tech layoffs to big firms like Google and Meta getting too bureaucratic and over-hiring staff who just did busywork, aka fake work.

European tech workers have not been immune to ongoing layoffs, but the effects have been cushioned by stronger labor protections and the fact talent costs less.

Investors want their year of efficiency

Ek makes his cuts despite relative strength in Spotify's finances.

In its most recent quarter, it reported a rare profit of $69 million after an 11% year-on-year jump in revenue to $3.6 billion. Operating costs have dropped 13% from last year too.

In truth, the CEO is also under pressure to cut costs from one particular quarter after expensive pushes into newer areas such as audiobooks and podcasts — with exclusive rights to Joe Rogan's podcast alone reportedly costing around $200 million.

In February, activist investor ValueAct took a stake in the company and publicly complained that Spotify's costs had "exploded."

"Spotify's superpower was combining engineering breakthroughs with organizational abilities — it organized creators and copyright owners to build an entirely new economic model that benefited everyone involved," ValueAct chief Mason Morfit reportedly said, according to Bloomberg.

"During the boom, it applied these powers to new markets like podcasts, audiobooks and live chatrooms. Its operating expenses and funding for content exploded. It is now sorting out what was built to last and what was built for the bubble."

Mark Zuckerberg — a friend of Ek's — dressed up the 21,000 layoffs at Meta since November last year as a necessary part of his "Year of Efficiency," which aims to get more out of employees. That followed vocal pressure to reduce staff by Meta investor Altimeter Capital.

Ek looks like he's following Silicon Valley's template.

Are you a current or former Spotify employee? Got a tip?
Contact Hasan Chowdhury at hchowdhury@businessinsider.com or Jyoti Mann at jmann@businessinsider.com. Reach out using a non-work device.