In a strategic move to navigate economic challenges, Spotify CEO Daniel Ek announced a substantial workforce reduction, affecting approximately 1,500 employees. This marks the third round of job cuts for the music-streaming giant this year, with Ek describing it as a “significant step change” for the company.

In a letter posted on the company’s website, Ek acknowledged the global economic slowdown and the increased cost of capital, noting that Spotify is not immune to these challenges. He stated that the decision to implement substantial job cuts was driven by the substantial gap between the company’s financial goals and its current operational costs. Ek considered the option of smaller cuts in the coming years but opted for a more decisive action to align costs with objectives.

“To be blunt, many smart, talented, and hard-working people will be departing us,” Ek stated in the letter. One-on-one meetings with affected staff are scheduled to take place before the end of the day Tuesday, providing employees with around five months of severance pay on average.

Spotify, which currently employs more than 9,000 people, had previously laid off over 500 employees in January and cut 200 employees from its podcasting unit in June. This move follows a trend among major tech companies, including Microsoft and Amazon, which have implemented job cuts in response to economic challenges arising from inflation, rising interest rates, and shifts in consumer spending.

While Spotify experienced “robust growth” over the past year, Ek pointed out that the company has become less efficient and has departed from the resourcefulness characteristic of its early days as a tech start-up. He emphasised the need for a strategic reorientation, stating, “This is not a step back; it’s a strategic reorientation.”

Despite adding 6 million subscribers in the June-to-September period, surpassing the company’s forecast, Spotify reported a modest profit of €32 million ($34.8 million), compared to a loss of €228 million ($248 million) in the same period last year. The company currently boasts a total of 226 million subscribers.

Ek highlighted the necessity for Spotify to become “relentlessly resourceful” and indicated that the reduction in workforce size would necessitate changes in the company’s operations. He pledged to share more details about these changes in the coming days and weeks.