Spotify will cut 17% of its workforce in its third round of job redundancies in 2023 amid rising business costs.

In a memo to all employees on Monday (Dec.4), the CEO of the streaming giant Daniel Ek said a “significant step change” for the company was needed as he announced approximately 1,500 jobs would go.

The 40-year-old co-founder of Spotify cited the investment in team expansion, content enhancement, and marketing in 2020 and 2021 as a core reason for the layoffs. The extra resources added helped the platform to increase revenues to $13.6bn in September, an increase of 12% year-on-year.

“However, we now find ourselves in a very different environment,” wrote Ek.

“And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big.”

In its results for the third quarter of the year, Spotify reported a profit of €65m (£55.7m)- its first quarterly profit for more than a year – helped by price rises and higher subscriber numbers. The Swedish company even surpassed Wall Street’s operating income projections, and its guidance for the fourth quarter suggests a sustained positive trajectory

But look beneath the headline figures and there are some points of concern for Spotify investors. The growth of premium subscribers in North America showed only modest gains and there was a slight year-over-year decline in third-quarter premium average revenue per user (ARPU).

What next for Spotify after job cuts?

The company must become “relentlessly resourceful” said Ek.

He added in his statement: The Spotify of tomorrow must be defined by being relentlessly resourceful in the ways we operate, innovate, and tackle problems. 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.

“Embracing this leaner structure will also allow us to invest our profits more strategically back into the business. With a more targeted approach, every investment and initiative becomes more impactful, offering greater opportunities for success. This is not a step back; it’s a strategic reorientation”

Featured image: Pixabay

Sam Shedden

Managing Editor

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