Music streaming company, Spotify has announced a plan to cut about 17 percent of its workforce – about 1,500 workers – to save costs in the face of “dramatically” slower economic growth.
The company’s CEO Daniel Ek made this known on Monday, in a letter sent to staff that was seen by AFP.
The move follows a 26 percent increase in active users to 574 million during the third quarter, which led to an unusual quarterly net profit of €65 million in October as opposed to a loss of €166 million during the same period last year.
According to Spotify, about 1,500 employees will leave the company.
After a spike during the Covid pandemic lockdowns, the tech sector announced a series of layoffs that resulted in the loss of tens of thousands of jobs.
In the letter confirming the development, Ek said; “I realised that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance.”
In 2020 and 2021, he claimed, the Swedish company “took advantage of the opportunity presented by lower-cost capital and invested significantly in team expansion, content enhancement, marketing, and new verticals.”
“However, we now find ourselves in a very different environment,” stating that “economic growth has slowed dramatically and capital has become more expensive.”
According to Ek, Spotify—which is traded on the New York Stock Exchange, was “more productive but less efficient” in 2022 and 2023. We must possess both qualities.”
Since its inception in 2006, Spotify has made significant investments to support its growth through market expansions and, subsequently, the addition of exclusive content like podcasts which has made more than $1 billion in podcast investments alone.
The company employed about 3,000 people in 2017, more than tripling that number to approximately 9,800 at the end of 2022.
This Monday announcement makes it the third round of layoffs Spotify has announced this year.
About 600 job cuts were announced by the company in January, and 200 more in the podcast division in June.
In his letter, Ek stated, “We discussed making smaller reductions throughout 2024 and 2025.”
“Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives.”
By the end of the decade, British telecom giant BT plans to cut up to 55,000 jobs. This was announced in May.
Microsoft and Meta, two of the biggest tech companies, have also disclosed that they intend to lay off up to 10,000 workers this year.
The massive online retail giant, Amazon declared in January that it was reducing over 18,000 jobs worldwide and Google parent company Alphabet announced cuts too.