Spotify, a major player in the music streaming industry, announced on Monday a significant reduction in its workforce, amounting to 17% of its nearly 9,000 employees.

Despite reporting a $71 million profit in the third quarter, the company is undertaking its third round of layoffs in less than a year.

This decision, cutting around 1,500 jobs, is part of Spotify’s strategy to streamline operations in response to a slowing economy.

Daniel Ek, Spotify’s CEO, communicated the decision in a note to employees, emphasizing the need for the company to become leaner and more efficient.

He stated, “I decided that a substantial action to rightsize our costs was the best option to accomplish our objectives. While I am convinced this is the right action for our company, I also understand it will be incredibly painful for our team.” Acknowledging the significant contributions of the affected employees, Ek remarked, “To be blunt, many smart, talented and hard-working people will be departing us.”

This move by Spotify comes as a surprise, especially given the company’s recent financial success, including achieving its first profit in more than a year during the July-September quarter, with a $349 million increase in revenue compared to the same period in 2022.

However, Ek cited the growing disparity between Spotify’s financial aspirations and its operational expenses as a key reason for the layoffs.

The company’s operating costs are projected to reach $3.45 billion in 2023.

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Employees affected by the layoffs will be notified within two hours and will receive a severance package that includes five months’ pay, adjusted for local notice periods and tenure, as well as accrued vacation pay and continued healthcare benefits during the severance period.

Additionally, they will be offered assistance in finding new employment and will have access to outplacement services for two months.

These layoffs bring Spotify’s total job cuts for the year to approximately 2,300.

Earlier in the year, the company reduced its workforce by 600 in January and another 200 in June from its podcast business, despite a substantial increase in podcast listeners.

This series of layoffs reflects the company’s ongoing efforts to align its spending with its revenues, which have been growing at a slower rate than its operational costs.

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