Simply days after folks gleefully posted their Spotify Wrapped, unhealthy information got here for the music streaming big. Spotify introduced right now that it might minimize 17 % of its workforce, a piece that equates to an estimated 1,500 folks. It’s the third time the world’s largest music streamer has minimize jobs this 12 months.

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

Ek stated the cuts could seem “surprisingly massive given the current constructive earnings report and our efficiency,” however on account of “the hole between our monetary aim state and our present operational prices,” Spotify would take “substantial motion.”

Regardless of its recognition (Spotify held 30 % of the music streaming market by late 2022), the corporate has lengthy struggled to show constant earnings. The layoffs wrap up a foul 12 months: Spotify minimize 6 % of its workforce final January, adopted by one other 2 % in June because it slimmed down its podcasting enterprise. Even because the world’s most recognizable music streaming service, Spotify is stricken by an unreliable enterprise mannequin, one during which report firms sit again and rake in royalty funds whereas artists can wrestle to usher in sufficient money.

“Buyers are more and more impatient in 2023 for tech companies to begin being profitable,” says Phil Chook, head of rights at royalties at software program improvement firm Vistex. Spotify isn’t alone—tech firms have slashed jobs all year long, with greater than 250,000 folks shedding jobs worldwide in 2023, in keeping with layoffs.fyi, a web site that tracks job cuts in tech.

Many main tech firms that overhired through the pandemic have taken steps to right-size—and that’s what Ek says Spotify is doing now. However Spotify’s excessive price to license music provides to its monetary pressure. “The price of doing enterprise is large for streaming firms,” Chook 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 floor, it seems nice,” says Simon Dyson, senior principal analyst of music and digital audio at consultancy agency Omdia. “It’s [those] nagging prices that it could possibly’t get on high of.”