Netflix has cut an additional 300 employees — around three percent of its workforce — marking the next round of major layoffs at the beleaguered streaming giant as it seeks to stem slowing growth.
“Both [co-chief Ted Sarandos] and I regret not seeing our slowing revenue growth earlier so we could have ensured a more gradual readjustment or the business,” read a note sent to staff on Thursday from Netflix co-chief Reed Hastings.
“We know these two rounds of layoffs have been very hard for everyone – creating a lot of anxiety and uncertainty. We plan to return to a more normal course of business going forward. And as we cut back in some areas, we also continue to invest significant amounts in our content and people: over the next 18 months, our employee base is planed to grow by ~1.5K to ~11.5K,” Hastings wrote.
In May, Netflix laid off around 150 staffers due to “slowing revenue growth,” rather than “individual performance,” a Netflix spokesperson said at the time. In addition to the full-time employees, many of whom were in the animation department, Netflix also cut dozens of contractors working across the company’s social media and publishing channels, including those dedicated to underrepresented identities like Strong Black Lead, Con Todo, Most and Netflix Golden.
The staff cuts came shortly after another round of layoffs that saw the loss of multiple contractors and full-time staffers working at Tudum, a Netflix fan site run by the company’s marketing division. The company had debuted Tudum last December to produce consumer-facing digital content about its own titles like Bridgerton, Stranger Things, Love Is Blind and Selling Sunset.
The move comes as the company continues to grapple and respond to an increasingly difficult and competitive streaming environment, as Netflix competes with tech giants like Amazon Prime Video and Apple TV+ as well as studio conglomerates’ platforms like Disney+, Hulu, Paramount+, HBO Max, Discovery+. (In Nielsen’s April “State of Play” streaming survey, about 46 percent of respondents replied that “it’s harder to find the video streaming content that they want to watch because there are too many streaming services available.”)
On April 19, Netflix disclosed that it had lost 200,000 subscribers in the first quarter of the year, falling far short of its own subscriber addition expectations. The last time Netflix disclosed a subscriber loss was in late 2011, and for much of the past decade the company has been seen as a growth story that led the industry toward a streaming-focused present. The streamer, which has about 222 million subscribers globally, also gave a lower forecast for its next quarter, saying its preparing to lose another 2 million subscribers.
And it has responded by looking at ways to control costs and revive subscriber growth.
When asked on an earnings call about a roughly $18 billion content spend for this year, co-chief Ted Sarandos said, “we will continue to grow the content spend relative to prior years.” CFO Spencer Neumann added more nuance to that statement, adding on the call: “we’re pulling back on some of our spend growth across both content and noncontent spend, but still growing our spend and still investing aggressively.”
The company also said it’s working on ways to crack down on password sharing, noting that 100 million households sharing the service. And it has signaled aggressively its expansion outside of its core subscription business model, including introducing mobile games — including adaptation of its own series like The Queen’s Gambit and Money Heist — as well plans for an cheaper, advertising-supported tier. (It’s “basic” subscription plan is currently $9.99 while its “standard” tier is $15.49.)
“We’ve left a big customer segment off the table, which is people who say: ‘Hey, Netflix is too expensive for me and I don’t mind advertising,’” Sarandos said on a June 23 panel at Cannes Lions with Kara Swisher. “We adding an ad tier; we’re not adding ads to Netflix as you know it today. We’re adding an ad tier for folks who say, ‘Hey, I want a lower price and I’ll watch ads.’”
Since Jan. 3, the first day of trading in 2022, stock in the streaming giant has fallen about 70 percent this year, from 597.37 a share to 177.39 a share as of June 23.
This month, the service received a stock downgrade from Benchmark analyst Matthew Harrigan on June 14, dropping the company from “hold” to “sell” with a price target of $157. Days earlier, Goldman Sachs analyst Eric Sheridan downgraded the firm from “neutral” to “sell” and cut his price target for the firm from $265 to $186, saying, “we have concerns around the impact of a consumer recession as well as heightened levels of competition” from streaming rivals.
More to come.
