Spotify has announced a third major round of staff cuts this year.
The music streaming giant said on Monday that it will lay off about 1,500 employees, or 17 percent of its headcount, to bring down costs. The announcement follows the release of 600 staff in January and a further 200 in June.
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The move fits with a growing trend in the tech sector, with economic conditions remaining more sluggish than expected. Following a round of redundancies at the start of the year, companies including Amazon and Microsoft-owned LinkedIn have announced further reductions recently.
In a letter to employees, Spotify CEO Daniel Ek said the company hired more in 2020 and 2021 due to the lower cost of capital and while its output has increased, much of it was linked to having more resources.
Spotify invested more than $1bn to build up its podcast business, signed up celebrities such as Kim Kardashian, Prince Harry and Meghan Markle and expanded its market presence across the globe in a quest to reach a billion users by 2030.
It currently has 601 million users, up from 345 million at the end of 2020.
Five months of severance pay
Ek said the reduction will feel large given a recent positive earnings report that saw the company report a profit in the third quarter, and its ongoing performance, including hitting its audience target of 601 million users early.
However, he noted that the gains were due mainly to the expanded resources.
“By most metrics, we were more productive but less efficient. We need to be both,” he said.
The company will start informing affected employees on Monday. They will get about five months of severance pay, vacation pay, and healthcare coverage for the severance period.
The company will also offer immigration support to employees whose immigration status is connected with their employment.
“We debated making smaller reductions throughout 2024 and 2025,” Ek said.
“Yet, 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,” he added.