Spotify will lay off 17% of its employees

(CNN) — Spotify fire It will cut about 1,500 employees to cut costs in what will be the third round of staff cuts this year, its CEO, Daniel Ek, announced Monday while announcing a “major” change in the music streaming company’s strategy.

“Economic growth has slowed dramatically and capital has become more expensive. Spotify is no exception to these facts.” books eck in a letter to employees posted on the company’s website.

The goal of Spotify’s changes is to make the company more efficient, returning it to its startup roots after a massive hiring and spending spree helped it gain tens of millions of subscribers but failed to make it consistently profitable.

Eck said the company discussed making smaller job cuts next year and in 2025. However, given the gap between our financial goal and our current operating costs, we decided that the best option to achieve our goals was to take substantive measures to adjust added costs.

“To be honest, a lot of smart, talented, hard-working people are leaving us.”

Eck said individual meetings will be held with affected employees before the end of work on Tuesday. Employees will receive an average severance pay of approximately five months.

Spotify, which employs more than 9,000 people, has laid off more than 500 employees In JanuaryShe joins a group of technology companies – including Microsoft and Amazon – in cutting staff numbers as the global economy slows. In June, Spotify laid off 200 employees Podcast module.

During the COVID-19 pandemic, big tech companies have embarked on a hiring spree to deal with growing demand for services such as online shopping and video conferencing from homes and businesses. But since then, inflation and higher interest rates have weighed on consumer spending, shrinking the supply of debt and equity financing and making it more expensive, prompting many to announce deep interest rate cuts.

Although Spotify enjoyed “strong growth” last year, the company has become “less efficient” and has moved away from the “ingenuity” that defined its early days as a tech startup, Ek said.

He added that too many people are involved in support work rather than focusing on providing content to creators and consumers.

Despite adding 6 million subscribers between June and September (2 million more than expected), Spotify made a profit of just €32 million (US$34.8 million) in that period. In the same period of the previous year, losses amounted to 228 million euros (248 million US dollars). The number of subscribers to the company is 226 million.

“We still have a way to go before we can be productive and effective,” Ek said. “We have to be relentlessly resourceful.”

“This is not a step backwards; it is a strategic redirection… A reduction of this magnitude will require changing the way we work, and we will share more about what this will mean in the coming days and weeks.”