Spotify has announced plans to decrease its workforce by approximately 17% as part of cost-cutting measures due to significantly slower economic growth.
Despite posting a rare quarterly operating profit of 32 million euros in October (contrasting with a 228 million loss from the previous year), the company aims to reduce expenses amid this economic slowdown.
This positive profit was driven by a substantial 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 said that in 2020 and 2021, the company “took advantage of the opportunity presented by lower-cost capital 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 dedicated significant investments toward expansion into new markets and, more recently, towards exclusive content like podcasts, representing a substantial focus on growth.
The company’s investment in podcasts alone has surpassed the billion-dollar mark.
From approximately 3,000 employees in 2017, Spotify’s workforce expanded dramatically, reaching around 9,800 by the conclusion of 2022.
Despite its triumph in the online music domain, Spotify has never achieved a full-year net profit and only sporadically reported quarterly profits.
