By Jon Swartz
Netflix Inc. is laying off about 150 employees, according to an internal memo sent Tuesday and confirmed by the streaming giant.
Most of the cuts, including some in the executive ranks and in the animation division, are in the U.S., and represent about 1.3% of the 11,300 employees reported at the end of 2021. The cutbacks had been expected since Netflix /zigman2/quotes/202353025/composite NFLX +5.03% reported last month that global subscribers declined by 200,000 during the first three months of the year — its first such drop in more than a decade — and executives said they would look to cut costs.
“As we explained on earnings, our slowing revenue growth means we are also having to slow our cost growth as a company. So sadly, we are letting around 150 employees go today, mostly U.S.-based,” a spokesperson for Netflix said in a statement. “These changes are primarily driven by business needs rather than individual performance, which makes them especially tough as none of us want to say goodbye to such great colleagues. We’re working hard to support them through this very difficult transition.”
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Netflix had already shed approximately 25 workers last month, axing members of the editorial staff for in-house publication Tudum that had launched just a few months prior.
“Our revenue growth has slowed considerably as our results and forecast below show,” Netflix executives said in an April quarterly letter to shareholders. “Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally. However, our relatively high household penetration — when including the large number of households sharing accounts — combined with competition, is creating revenue growth headwinds.”
During a subsequent earnings call with analysts, Netflix Chief Financial Officer Spencer Neumann said the company wanted to be “prudent in terms of pulling back on some of that spend growth to reflect the realities of the revenue growth of the business” over the next two years.
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Of late, Netflix has felt the pinch of intensifying competition from media giants like Walt Disney Co. /zigman2/quotes/203410047/composite DIS +3.69% , Apple Inc. /zigman2/quotes/202934861/composite AAPL +2.45% , Comcast Corp. /zigman2/quotes/209472081/composite CMCSA +1.18% , and Paramount Global /zigman2/quotes/200340870/composite PARA +5.06% and AT&T Inc. /zigman2/quotes/203165245/composite T +1.84% , all of whom have plunged into the video-streaming market. Netflix has also been hit hard by the war in Ukraine, which resulted in the removal of 700,000 customers in Russia; inflation, which has forced consumers to trim back their streaming use; and the inevitable drop in streaming viewing as COVID restrictions lifted the past several months.
At the same time, Netflix spent $17 billion on content in fiscal 2021.
To drive more revenue, Netflix plans to offer a lower-priced streaming plan that includes advertisements, probably this year, while also looking to crack down on subscribers who share their account with nonpaying viewers.
Though Netflix’s staff reduction is relatively modest, it could have significant impact, Mark Vena, CEO of SmartTech Research, told MarketWatch. The layoff of 70 part-time roles in the company’s animation studio could hinder the delivery of new content, he said, signaling that Netflix is “getting serious about reigning in overall production costs.”