Topline
Netflix plans to cut its spending costs by $300 million in 2023 largely because the company had to postpone its initiative to limit password and account sharing, which was expected to generate new revenue, the Wall Street Journal reported Friday.
Netflix has delayed its password sharing crackdown, which was expected to help produce new revenue.
Key Facts
Netflix had originally planned to restrict password sharing—which is expected to result in more account subscriptions—in the first quarter of this year, but it is now expected to roll out in the second quarter, delaying anticipated revenues from the crackdown, the Wall Street Journal reported, citing people familiar with the matter.
The exact areas where Netflix plans to cut spending are unclear, and the company did not immediately respond to Forbes’ request for comment, but a year ago it was considering paring down its real estate footprint and altering its subscription costs.
According to the Wall Street Journal report, company executives stressed conservative spending in an internal meeting this month, but said there would be no hiring freeze or layoffs, despite widespread job cuts across the tech sector.
The streaming giant first announced its plan to limit password sharing in April 2022, saying it had tested different ways to monetize account sharing and regain lost revenue—but the changes were pushed back in February and have yet to be implemented as the company is still determining the best approach for the crackdown, per Wall Street Journal.
Key Background
The spending reduction represents a small percentage of Netflix’s overall operating expenses, which were $26 billion last year, but it comes at a challenging time in the streaming industry. Following the announcement of its password crackdown, Netflix reported last summer it had lost almost a million subscribers—its first subscriber loss in a decade—though it reversed those declines in the second half of 2022. The large number of different streaming services has prompted many to predict consolidation across the industry, which has already begun with HBO Max and Disney+ merging to become super-service Max this month. Netflix has been experimenting with different subscription options, including a lower-cost, ad-supported tier launched at the end of 2022.
What To Watch For
As it plans to roll out its password sharing restrictions in coming months, Netflix has said it will start blocking devices in the U.S. that attempt to access a Netflix account without properly paying. It has also experimented with a paid sharing option in four countries outside with the U.S. and was “pleased with the results.”
Further Reading
Netflix Plans to Cut Spending by $300 Million in 2023 (Wall Street Journal)
Netflix Password Sharing—Everything You Need To Know (Forbes)
Netflix Earnings: Stock Slides As Profit Outlook Weakens—Despite Subscriber Growth (Forbes)
This Is When The Netflix Password Sharing Crackdown Will Begin (Forbes)
The streaming boom is over (Vox)
Source: https://www.forbes.com/sites/katherinehamilton/2023/05/12/netflix-reportedly-cutting-spending-by-300-million-after-delay-on-password-sharing-crackdown/