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Spotify to cut 17% of staff in cost-cutting measure

Published December 4, 2023last updated December 4, 2023

Spotify, a digital music service, could be seeking to boost its profitability with the move. The Stockholm-headquartered company has never posted a full-year net profit.

https://p.dw.com/p/4Zjo7
A symbol photo of a Spotify listener
Spotify has millions of paying subscribersImage: Thomas Trutschel/photothek/picture alliance

Digital music giant Spotify said Monday that it would  lay off around 1,500 employees as a means to reduce costs. 

"To align Spotify with our future goals and ensure we are right-sized for the challenges ahead, I have made the difficult decision to reduce our total headcount by approximately 17% across the company," Spotify co-founder and CEO Daniel Ek said in a statement.

The cost-cutting measure could serve as a means to boost profitability at Spotify. Price hikes have already propelled the company to a rare €32 million ($34.7 million) profit in the third quarter.  

"I realize that for many, a reduction of this size will feel surprisingly large given the recent positive earnings report and our performance," Ek added.

"We debated making smaller reductions throughout 2024 and 2025. Yet, considering the gap between our financial goal state and out current operational costs, I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives."

How Spotify & Co. use AI to transform entertainment

Although Spotify has posted an occasional quarter profit, the company has never delivered a full-year net profit.  

"The Spotify of tomorrow must be defined by being relentlessly resouceful in the ways we operate, innovate and tackle problems," Ek said, adding that in the next phase, "being lean is not just an option but a necessity." 

Third round of Spotify layoffs in 2023

It's the third time Spotify has announced employee layoffs this year.

Prior to the layoffs, Spotify had around 9,800 employees at the end of 2022. In January, the company said it would lay off about 600 employees, with Spotify also announcing it would cut an extra 200 jobs in June. 

Over the last 18 months, tech companies such as Google, Amazon and Meta have slashed jobs amid fears of a recession, rising interest rates and also due to the expectations of investors. The COVID-19 pandemic led to dramatic growth for companies offering digital services, with many big tech firms going on a hiring spree during that period. 

In order to grapple with the post-pandemic slump, Spotify is adding more services, with the company offering 200,000 audiobooks to its premium subscribers in November. 

wd/nm (Reuters, AFP)