Spotify announced Monday that it will reduce its workforce by approximately 17% in order to minimize costs amid “dramatically” slower economic growth.
Spotify reported a rare quarterly operating profit of 32 million euros in October, compared to a loss of 228 million in the same period the previous year, thanks to a 26% increase in active users during the third quarter.
“I realise that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance,” chief executive Daniel Ek wrote in a letter to employees, which was seen by AFP.
He stated that the company “took advantage of the opportunity presented by lower-cost capital in 2020 and 2021 and invested significantly in team expansion, content enhancement, marketing, and new verticals.”
“However, we now find ourselves in a very different environment. And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big.”
Since its inception, Spotify has made significant investments to fuel growth through expansions into new areas and, in later years, unique content such as podcasts.
It has spent nearly a billion dollars solely on podcasts.
The company employed roughly 3,000 employees in 2017, with the amount expected to more than triple to around 9,800 by the end of 2022.
Despite its success in the internet music market, the company has never posted a full-year net profit and only infrequently quarterly earnings.