Spotify to cut 17% of its staff

London (CNN) — Spotify will lay off around 1,500 employees to reduce costs in a third round of job cuts this year, CEO Daniel Ek said Monday as he announced a “significant” strategy shift for the music-streaming company.

“Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities,” Ek wrote in a letter to staff posted to the company’s website.

Spotify’s changes aim to make the company more efficient, taking it back to its startup roots after a massive hiring and spending spree helped it gain tens of millions of subscribers — but didn’t make it consistently profitable.

Ek said the firm had debated making smaller job cuts next year and in 2025. “Yet, considering the gap between our financial goal state and our current operational costs, I decided that a substantial action to right-size our costs was the best option to accomplish our objectives,” he added.

“To be blunt, many smart, talented and hard-working people will be departing us.”

Ek said one-on-one meetings with impacted staff would take place before the end of the day Tuesday. Employees will receive around five months of severance pay on average.

Spotify (SPOT), which employs more than 9,000 people, laid off more than 500 employees in January, joining a slew of tech companies — including Microsoft (MSFT) and Amazon (AMZN) — in slashing headcount as the global economy slowed. And in June, Spotify cut 200 employees from its podcasting unit.

Major tech companies went on a hiring spree during the Covid-19 pandemic to keep up with a surge in demand from households and businesses for services such as online shopping and videoconferencing. But since then, inflation and rising interest rates have weighed on consumer spending, squeezed the supply of debt and equity funding, and made it costlier, leading many of them to announce deep job cuts.

While Spotify has enjoyed “robust growth” over the past year, the company has become “less efficient” and moved away from the “resourcefulness” that defined its early days as a tech start-up, Ek said.

Too many people are dedicated to support work rather than focused on delivering for content creators and consumers, he added.

Despite adding 6 million subscribers in the June-to-September period — 2 million more than the company had forecast — Spotify eked out a profit of just €32 million ($34.8 million) in that time. That was up from a loss of €228 million ($248 million) in the same period last year. The company has 226 million subscribers in total.

“We still have a ways to go before we are both productive and efficient… we have to become relentlessly resourceful,” Ek said.

“This is not a step back; it’s a strategic reorientation… A reduction of this size will make it necessary to change the way we work, and we will share much more about what this will mean in the days and weeks ahead.”