Netflix announced a big round of layoffs this week, letting go of 150 employees. It’s the company’s response to losing thousands of subscribers in the first three months of 2022.
This is an inflection point for the streaming giant, as it predicts losing 2 million subscribers in the next quarter, says LA Times Hollywood business reporter Ryan Faughnder.
“On top of that, their revenue growth is slowing quite a bit from where they were, especially during the pandemic, when this is pretty much all we had to do was sit at home and watch Netflix or whatever else was on TV. And the 150 losses of jobs was not necessarily a surprise. But it does represent something that's a little bit of a turning point for Netflix, which is that as its revenue growth slows, so [does] the growth of its costs,” Faughnder explains.
Laid-off employees worked in recruitment, content, and marketing. Netflix also let go of some contractors, including marketers who were supposed to promote LGBTQ+ and other diverse programming, which has caused a stir online.
Faughnder says in the months after the Dave Chappelle special, the company became internally divided. It pushed Netflix to tell its workers that if they don’t agree with the content they’re working on, they can find a job elsewhere.
“Netflix is basically codifying what its position has been all along, which is, ‘We are here to serve a very wide range of viewers. We're here to entertain as many people around the world as possible, and that's going to include making some content that people on staff may not agree with, or even find harmful,’” he explains. “This is a signal to current employees, but it's also a signal to prospective employees who might be thinking of joining. This is very much a know-before-you-go kind of thing.”
To recover from its financial losses, Netflix is considering new content changes, including longer theatrical releases of its movies, adding ads, and even creating live-streamed events.
Faughnder says Netflix’s programming plans are likely the start of a larger shift in the streaming industry — one that might look familiar to some viewers.
“As we go forward, streaming is going to start looking a lot like regular TV. There's going to be ads on HBO Max. There's going to be ads on Disney+. And that is in exchange for paying a little bit less. People who choose to pay for a lower tier of Netflix, once this change is put into place, will be able to save some money by agreeing to watch some advertising, which is very similar to the world of cable.”
It’s still unclear whether Netflix will be able to maintain its status as a platform with must-see TV. However, Faughnder says other services are delivering, like Disney+ and HBO Max.
“The one thing that Netflix really didn't change about Hollywood is that the hits are what drive the business. A hit is a hit. And if you don't have the hits, you're gonna fall behind,” Faughnder says. “[If] you’re Netflix and you've been in the business of creating TV shows and movies for maybe 10 or 12 years or so, that's a tough hill to climb — to be able to compete with companies that have been doing this for upwards of close to 100 years.”
But Faughnder admits that Netflix is still at the top in terms of subscriber numbers. It has 222 million customers, while its closest rival Disney+ has less than 140 million.