As the year comes to a close, Spotify has announced a significant reduction in its workforce, laying off 17% of its employees by the end of 2023. This decision comes as the music-streaming giant seeks to streamline its operations and align its cost structure with its long-term goals for sustainable growth.

CEO Daniel Ek acknowledged the challenging times ahead and emphasized the need for decisive action to address the widening gap between Spotify’s financial targets and its current operational costs. This move follows a period of rapid expansion for Spotify, driven by favorable investment conditions in 2020 and 2021, and the company’s cost structure remains too high.

Approximately 1,500 employees are expected to be affected by the layoffs, reducing Spotify’s workforce from around 9,000 employees. To mitigate the impact, Spotify offers a five-month severance package, healthcare coverage during that period, and immigration/career support.

Ek also highlighted the company’s revamped royalty model, designed to better support artists while reducing fraudulent streams. He emphasized the importance of lean operations in Spotify’s next phase, stating that it is not just an option but a necessity.

This decision reflects the broader challenges facing the tech industry, with many companies facing economic headwinds and being forced to make difficult decisions.