Spotify reduces workforce by 17% due to increasing capital costs

Spotify is cutting approximately 1,500 jobs, representing about 17% of its workforce, in its third round of layoffs this year as part of its efforts to become more efficient and productive.

In a message to employees on Monday, Spotify founder and CEO Daniel Ek emphasized the importance of right-sizing the workforce to address the challenges ahead.

He pointed to slow economic growth and rising capital costs as factors leading to the job cuts, noting that the company had taken advantage of lower-cost capital in 2020 and 2021 to make significant investments in the business.

“I understand that this will impact many individuals who have contributed significantly. To be frank, many intelligent, talented, and hard-working people will be leaving us,” he stated in the message, which was later shared on the company's blog.

Spotify currently employs around 8,800 people and will inform those affected later in the day. This latest round of layoffs follows previous reductions of about 6% of jobs in June and several hundred employees in January.

While Spotify has reported strong growth in user numbers and exceeded expectations for operating income, challenges remain in certain areas such as North American premium subscriber growth and average revenue per user.

“I understand that for many, a reduction of this scale may seem significant given our recent positive financial results and performance. We considered making smaller reductions over the next few years,” Ek explained.

“However, in light of the discrepancy between our financial goals and current operational costs, I concluded that a substantial cost-cutting measure was the most effective way to achieve our objectives.”

Various industries globally have experienced significant layoffs this year, with over 225,000 employees affected, driven by economic volatility, higher interest rates, and shifting consumer behavior. The tech sector, which includes companies like Amazon, Google, Meta, Twitter, and Netflix, has also faced notable workforce reductions, causing unease among employees.