• by Colin Kirkland , December 4, 2023

Spotify is cutting about 17% of its workforce, or about 1,500 employees in a move that co-founder and CEO Daniel Ek called a “strategic reorientation” in his statement on Monday.

This decision was based on the company's desire to become “both productive and efficient,” marking the third round of layoffs for the music streaming giant this year.

The layoffs may come as a surprise due to the company's recent third-quarter numbers, which show a positive operating income and over 230 million USD in free cash flow. However, according to Ek, Spotify must ensure the “right-sized” workforce in order to face the “challenges ahead.”

“Economic growth has slowed dramatically and capital has become more expensive,” Ek said. “Despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big.”

Ek went on to say that the company made use of lower-cost capital in 2020 and 2021 and invested “significantly” in team expansion, content enhancement, marketing and new verticals. While the company reported growing its monthly active users by 26% year-over-year, the company has since been unable to keep up with its prior momentum.

In the first half of 2023, Spotify lost $462 million, which is more than double the loss in the same period in 2022. In January Spotify cut a few hundred employees and then cut another 6% of jobs in June.

“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,” Ek noted.

One of Spotify's main objectives right now surrounds its payout model, which the company recently changed in order to quell artists’ ongoing criticisms related to low compensation for in-app streams. In November, Spotify said that it would be eliminating payments for songs under 1,000 streams––which it says make up less than 0.5% of all plays––in order to cut out artificial uploads and white noise tracks.

Spotify is currently the world's leading music streaming platform, boasting over half a billion users, with more than 360 million monthly active users whose accounts are supported by advertising and 226 million paying subscribers in over 180 markets.