The music streaming giant Spotify has announced it's cutting 17% of its workforce in a dramatic move aimed at slashing costs.
In a memo addressed to staff, CEO Daniel Ek said it was critical that the company "rightsize" its financial situation after hiring too many people in 2020 and 2021, when capital was cheaper.
"The Spotify of tomorrow must be defined by being relentlessly resourceful in the ways we operate, innovate, and tackle problems," Ek wrote. "This kind of resourcefulness transcends the basic definition — it's about preparing for our next phase, where being lean is not just an option but a necessity."
This latest round of cuts — the third this year — equates to about 1,500 jobs, according to a CNBC source that said the Swedish company currently employs about 9,000 people across more than 40 global office locations.
Across the tech industry, tens of thousands of positions have been cut in the last year as a pandemic-era boon continues to fade. According to the tech job tracker layoffs.fyi, more than 250,000 tech workers have been laid off since the start of the year.
Still, the size of the Spotify cuts may feel "surprisingly large" for the moment, Ek wrote.
The company posted $34 million in operating income during its third-quarter earnings call, its first quarterly profit since 2021. Lower personnel costs, driven by two smaller rounds of cuts, was one of the factors cited for saving costs.
The company cut 6% of its workforce, about 600 employees, in January. It laid off another 2% of staff, roughly 200 roles, in June.
At the same time, Spotify raised prices on its subscription plans and set a lofty goal to reach a billion users by 2023. It currently has over 570 million of them — a little less than double the number of listeners the platform attracted in 2020.
The company has also shared its vision to go beyond music and expand in audiobooks and podcasting, a space that's feeling a financial strain and steep competition for both listeners and advertisers.
Since 2019, Spotify has spent close to a billion dollars buying up podcasting studios, signing exclusive deals with celebrity hosts and, most recently, investing in generative AI for ad creation.
But all this investment has come with high-profile headaches — and still failed to turn a profit. The company's layoffs in June were specifically focused on downsizing its podcast division.
As of 8:30 a.m. on Monday, Spotify's shares were up about 5% in premarket trading.
Departing employees will be offered approximately five months of severance pay plus healthcare coverage, vacation pay, immigration support and two months' worth of career-search assistance, according to Ek's statement.
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