Spotify Technology (NYSE:SPOT), a digital music, podcast, and video service provider, has announced its plans to reduce its workforce by approximately 17% as part of cost-cutting measures aimed at improving productivity and efficiency. This decision will impact approximately 1,500 employees, according to reports.

In pre-market trading on the NYSE, Spotify shares were up by more than 2 percent.

In a message to the company’s employees, Spotify’s founder and CEO, Daniel Ek, explained that the decision to downsize was made with the goal of building a stronger and more efficient Spotify that can better address future challenges. He acknowledged that this reduction might seem significant to many, especially considering the recent positive earnings report and overall performance. There were discussions about smaller reductions in staffing throughout 2024 and 2025. However, given the gap between their financial objectives and current operational costs, Ek concluded that a substantial reduction was the best course of action to achieve their goals.

Ek emphasized that Spotify had initially aimed for consistent profitability and growth in the future. However, economic conditions have changed significantly, with a dramatic slowdown in economic growth and increased capital expenses. Despite efforts to cut costs in the past year, the company’s cost structure remained larger than desired, necessitating these measures.

Looking back at 2022 and 2023, Ek expressed pride in the company’s achievements but recognized that they had become more productive at the expense of efficiency. He stressed the importance of achieving both productivity and efficiency. While efforts had been made to address this challenge and enhance efficiency in 2023, there is still work to be done to strike the right balance.

It’s worth noting that earlier in June, Spotify had already laid off 200 employees in its podcasting division, representing approximately 2% of its total workforce.