Just days after individuals gleefully posted their Spotify Wrapped, dangerous information got here for the music streaming large. Spotify introduced as we speak that it will reduce 17 percent of its workforce, a piece that equates to an estimated 1,500 people. It’s the third time the world’s largest music streamer has reduce jobs this 12 months.

The information got here after Spotify posted its first profitable quarter since 2021. In a memo to employees, CEO Daniel Ek stated the corporate had expanded its workforce and choices considerably all through 2020 and 2021, due to lower-cost capital, however is now bumping up in opposition to the identical issues startups throughout industries are going through, like excessive capital prices and slowed financial development.

Ek stated the cuts could seem “surprisingly large given the recent positive earnings report and our performance,” however as a result of “the gap between our financial goal state and our current operational costs,” Spotify would take “substantial action.”

Despite its recognition (Spotify held 30 percent of the music streaming market by late 2022), the corporate has lengthy struggled to show constant income. The layoffs wrap up a nasty 12 months: Spotify reduce 6 percent of its workforce final January, adopted by one other 2 percent in June because it slimmed down its podcasting enterprise. Even because the world’s most recognizable music streaming service, Spotify is tormented by an unreliable enterprise mannequin, one through which document corporations sit again and rake in royalty funds whereas artists can battle to bring in enough cash.

“Investors are increasingly impatient in 2023 for tech firms to start making money,” says Phil Bird, head of rights at royalties at software program improvement firm Vistex. Spotify isn’t alone—tech corporations have slashed jobs all year long, with greater than 250,000 individuals dropping jobs worldwide in 2023, in line with layoffs.fyi, a web site that tracks job cuts in tech.

Many main tech corporations that overhired through the pandemic have taken steps to right-size—and that’s what Ek says Spotify is doing now. But Spotify’s excessive price to license music provides to its monetary pressure. “The cost of doing business is huge for streaming companies,” Bird says.

Spotify gained momentum within the third quarter of 2023, incomes €32 million ($34.6 million) in working earnings. It now has 226 million subscribers and 574 million month-to-month customers. “On the surface, it looks great,” says Simon Dyson, senior principal analyst of music and digital audio at consultancy agency Omdia. “It’s [those] nagging costs that it can’t get on top of.”