Spotify is set to lay off approximately 1,500 people to decrease expenses in a third round of layoffs this year.
According to CEO Daniel Ek, the move is a "significant" strategy shift for the streaming to deal with the ever-changing economy.
"Economic growth has slowed significantly, and capital is becoming more expensive." "Spotify is not immune to these realities," Ek wrote in a statement to employees published on the company's website.
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Spotify's reforms attempt to make the company more efficient, returning it to its startup beginnings after a big hiring and spending spree helped it earn tens of millions of customers but failed to make it profitable on a consistent basis.
Ek stated that the company had discussed contemplating smaller employment cuts next year and in 2025. "Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to right-size our costs was the best option to accomplish our objectives," he said.
"To be blunt, many smart, talented and hard-working people will be departing us."
He stated that one-on-one discussions with affected employees would occur before Tuesday's end of the day. On average, employees will receive five months of severance pay.
Spotify (SPOT), which employs over 9,000 people, lay off over 500 workers in January, joining a wave of tech firms, including Microsoft (MSFT) and Amazon (AMZN), in reducing employment as the global economy slowed. In June, Spotify laid off 200 people from its podcasting division.
During the COVID-19 pandemic, major technology companies went on a hiring frenzy to meet increased demand from homes and businesses for services such as online shopping and videoconferencing. Inflation and rising interest rates have weighed on consumer purchasing, restricted the supply of loan and equity finance, and made it more expensive, prompting many of them to announce significant job losses.
While Spotify has had "robust growth" in the last year, he claims the company has grown "less efficient" and has strayed from the "resourcefulness" that marked its early days as a software start-up.
He noted that too many individuals are dedicated to supporting work rather than providing for content creators and customers.
Despite collecting 6 million users from June to September — 2 million more than the business had predicted — Spotify made only €32 million ($34.8 million) during that time. This improved from the previous year's loss of €228 million ($248 million). The company has a total of 226 million subscribers.
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