Faced with a "dramatic" slowdown in its growth, Spotify announced on Monday that it was reducing its workforce by "about 17%", or some 1,500 people. "I am aware that for many, a reduction of this magnitude may seem surprising given the recent positive earnings report and our performance," Chief Executive Daniel Ek wrote in a letter to employees seen by AFP.
In the third quarter, the world's leading streaming platform posted a rare operating profit thanks to a 26% increase in the number of active users and a net profit of €65 million. So why downsize? The layoffs are intended to "align Spotify with our future goals and ensure that we are well-positioned for the challenges ahead," Ek said in the letter.
Costs 'still too high', according to CEO
According to him, in 2020 and 2021, the company "took advantage of the opportunity offered by lower-cost capital and invested significantly in team expansion, content enhancement, marketing, and new market verticals." "However, we are now in a very different environment. And despite our efforts to cut costs last year, our cost structure to achieve our targets is still too large," he added.
Spotify has continued to invest since its launch to fuel its growth by expanding into new markets and then offering exclusive content, such as podcasts. An area in which it has invested more than a billion dollars.
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In 2017, the company had about 3,000 employees, a number that more than tripled to about 9,800 people by the end of 2022. Since its inception, the platform has never posted a net profit for the entire year and only occasionally makes quarterly profits, despite its success in the online music market.