The most large round of layoffs at the struggling streaming juggernaut includes 300 extra employees, or about 3% of its staff.
Netflix co-chiefs Reed Hastings and Ted Sarandos wrote to staff on Thursday, saying, “Both Ted and I regret not spotting our slowing revenue growth earlier so we could have assured a more progressive realignment of the business.”
According to the email, there were 216 employees affected in the United States and Canada, 30 in Asia-Pacific nations, 53 in Europe, the Middle East, and Africa, and 17 in Latin America.
“We are aware that the two rounds of layoffs have been extremely difficult for everyone and have led to a great deal of worry and uncertainty. Moving forward, we intend to resume our regular business operations. While making cuts in some areas, Hastings and Sarandos continued, “We continue to invest significantly in our content and people; over the next 18 months, our employment base is anticipated to grow by 1.5K to 11.5K.
According to a statement from a Netflix spokeswoman, the reductions were made so that the streaming service’s “costs are growing in step with our slower revenue growth.”
A representative for Netflix at the time stated that the reason for the 150 layoffs in May was “slowing revenue growth,” not “individual performance.” Numerous contractors working for Netflix’s social media and publishing channels, including those devoted to underrepresented identities like Strong Black Lead, Con Todo, Most, and Netflix Golden, were laid off in addition to the company’s full-time employees, many of whom were in the animation division.
The layoffs of numerous contractors and full-time employees at Tudum, a Netflix fan site run by the company’s marketing division, came shortly after another round of layoffs. In order to create consumer-facing digital material for its own shows like Selling Sunset, Stranger Things, and Bridgerton, the business launched Tudum in December of last year.
With platforms from studio conglomerates like Disney+, Hulu, Paramount+, HBO Max, and Discovery+ in addition to tech behemoths like Amazon Prime Video and Apple TV+, Netflix is facing a challenging streaming landscape that it must continue to navigate and adapt to. (Approximately 46% of respondents to Nielsen’s April “State of Play” survey on streaming said it was tougher to find the video material they wanted to watch since there are so many streaming providers available.)
On April 19, Netflix said that it had lost 200,000 customers in the first three months of the year, well exceeding its own estimates for subscriber growth. Netflix has been viewed as a growth story for much of the previous ten years, leading the industry toward a streaming-focused era. The last time the firm acknowledged a subscriber loss was in late 2011. The streamer, which has over 222 million members worldwide, also provided a less optimistic projection for the upcoming quarter, stating that it expects to lose an additional 2 million subscribers.
And in response, it has looked into methods to reduce costs and boost subscriber growth.
Sarandos responded, “We will continue to raise the content spend relative to recent years,” when questioned on an earnings call about an estimated $18 billion in content spending this year. Netflix is “pushing back” on its “spend growth across both content and non-content expenditure,” the CFO Spencer Neumann continued, “while still growing our spend and still investing aggressively.”
Considering that 100 million homes share the service, the business has stated that it is looking into measures to cut down on password sharing. Through the introduction of mobile games, which include adaptations of its own series like The Queen’s Gambit and Money Heist, as well as plans for a less expensive, advertising-supported tier, it has also hinted at an aggressive growth outside of its main subscription revenue model. (At the time of writing, Netflix’s “basic” subscription tier costs $9.99, while its “standard” tier costs $15.49.)
We’ve ignored a sizable portion of the market, namely those who claim that Netflix is too pricey for them but that they don’t mind advertisements. In a discussion with Kara Swisher on June 23, Sarandos noted. “We’re not bringing commercials to Netflix as you know it now; we’re just adding an ad tier. For people who say, “Hey, I want a lower price, and I’ll watch advertisements,” we’re launching an ad tier.
Stock in the streaming juggernaut has decreased by almost 70% since Jan. 3, the first trading day of 2022, from $597.37 per share to $177.39 per share as of June 23.
Benchmark analyst Matthew Harrigan downgraded the service’s shares on June 14, changing its rating from “hold” to “sell” and setting a price objective of $157. Days before, Goldman Sachs analyst Eric Sheridan lowered the company’s rating from “neutral” to “sell” and lowered his price target from $265 to $186, stating that he was “concerned” about the effects of a consumer recession and “heightened levels of competition” from streaming rivals.