Topline
Netflix laid off 300 employees in a second round of cuts Thursday and confirmed plans to offer a cheaper ad-supported subscription tier, amid financial troubles after the streaming site lost hundreds of thousands of subscribers in the first quarter of this year.
Netflix co-CEO Ted Sarandos speaks at a summit.
Key Facts
A spokesperson for Netflix told Forbes the company laid off the employees so its costs would better accommodate a “slower revenue growth,” adding Netflix is “working hard to support” the employees through this “difficult transition.”
The cuts—which Variety first reported were across multiple departments—come after Netflix laid off 150 employees from its 11,000-person staff in May while also announcing further rounds of layoffs in the future.
Earlier Thursday, Netflix’s co-CEO Ted Sarandos confirmed the company—once strongly averse to advertisements—will begin to offer a cheaper, ad-supported subscription tier to attract more users.
Netflix has “left a big customer segment off the table,” Sarandos said at the Cannes Lions advertising festival, adding the company was providing an option for “folks who say, ‘Hey, I want a lower price and I’ll watch ads.’”
Surprising Fact
Netflix’s share price has plunged 70% since the beginning of the year.
Key Background
Netflix in April reported a loss of 200,000 subscribers during the first quarter of 2022 after initially saying it expected to add 2.7 million users, marking its first loss in users in over a decade. The company has predicted it may lose another 2 million subscribers this quarter. The losses came as Netflix has had to compete with a host of newer streaming services such as Disney+, HBO Max and Paramount. Disney+ announced in March it would add an ad-supported subscription option later in the year, while HBO Max started to offer the cheaper plan last year, and another major competitor—Hulu—also has an ad-supported option. Netflix co-CEO Reed Hastings has long expressed his opposition to ad-supported plans, but amid Netflix’s subscriber losses in April, Hastings said even though he has previously been “against the complexity of advertising,” he was a “bigger fan of consumer choice.” The company has blamed slowing growth partially on password sharing, estimating 100 million households around the world share passwords, including 30 million in the U.S. and Canada.
Further Reading
Netflix Begins Second Round of Layoffs, 300 Positions Cut (EXCLUSIVE) (Variety)
Roughly 150 Netflix Employees Laid Off After Subscriber Losses (Forbes)
Ads Are Officially Coming to Netflix. Here’s What That Means for You (Time)
Source: https://www.forbes.com/sites/madelinehalpert/2022/06/23/netflix-lays-off-300-more-employees-amid-subscriber-losses/