Spotify will cut more than 1,500 jobs after bosses said the company needed to reduce costs amid a slowdown in economic growth and rising interest rates.
In a note to staff on Monday morning, chief executive Daniel Ek confirmed Spotify will reduce its headcount by 17pc. The music streaming service employs about 9,300 staff globally.
He said: “I recognise this will impact a number of individuals who have made valuable contributions.
“To be blunt, many smart, talented and hard-working people will be departing us.”
It marks the third round of redundancies at Spotify this year as Mr Ek said costs are still too high despite efforts to make savings.
The Swedish business previously laid off almost 600 staff in January, while it also cut 200 roles in its podcasting division in June.
The latest cuts are likely to raise eyebrows given recent signs of improvement in Spotify’s performance.
The company swung to a rare profit in the third quarter as it benefitted from price rises and growth in subscribers in all regions.
In July, Spotify increased the monthly cost of a subscription from £9.99 to £10.99 – the first price rise in its 15-year history.
It also estimated that monthly listeners would reach 601 million in the fourth quarter, representing a gain of more than 100 million users this year.
However, Mr Ek admitted that much of Spotify’s recent success was “linked to having more resources” as the company took advantage of low interest rates to fund its expansion.
He said: “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.”
Spotify has been scrambling to find new growth areas as the economic slowdown hits advertising revenues and pressure grows over its payouts to artists and record labels.
The company has also run into difficulty with its $1bn (£790m) foray into podcasting. The company spent heavily on the format, inking a $20m deal for Meghan Markle’s Archetypes show and signing up celebrities including Barack and Michelle Obama.
But Archetypes was cancelled after just 12 episodes, while the streaming service also lost its exclusive deal with the Obamas.
In October, Spotify said it was stepping up its audiobook offering in a bid to attract new subscribers and reduce its reliance on the music industry.
The service now offers premium subscribers in the UK up to 15 hours of audiobooks each month for no additional fees.
However, Mr Ek raised more fundamental concerns about the way Spotify was operating, saying the company had become “more productive but less efficient”, adding: “We need to be both.”
In his note to staff, he said: “Today, we still have too many people dedicated to supporting work and even doing work around the work rather than contributing to opportunities with real impact.
“More people need to be focused on delivering for our key stakeholders – creators and consumers. In two words, we have to become relentlessly resourceful.”