How Netflix Plans To Stop Hemorrhaging Money
Netflix is implementing cost-cutting measures in an effort to put its business in a better place.
This article is more than 2 years old
Netflix is making some major concessions in an effort to help put its business back in a better spot. The streaming giant has been suffering in recent months from steep drops in subscribership. As such, the company is looking for ways to both save money and win back lost viewers.
Netflix is employing multiple strategies as it tries to steer itself back toward a better business trajectory. According to the Wall Street Journal, its efforts include axing employee perks and slashing global operating expenses. The company recently laid off hundreds of workers, which it is now replacing with more junior staff members, thus reducing their payroll expenditures. Netflix also announced the closure of its Salt Lake City office.
“We’re trying to be smart about it and prudent in terms of pulling back on some of that spend growth to reflect the realities of the revenue growth of the business,” highlighted Netflix CFO Spencer Neumann. For employees, this has materialized into less merchandise available to them. Prior to their struggles, Netflix used to let employees order as much Netflix-branded merchandise as they wanted at no cost to them. The company has now put a $300 value cap on what employees can order.
Moreover, the shift toward sourcing fresh talent versus experienced candidates is something that is uncharacteristic of Netflix. Historically, Netflix has lined its staff with personnel in the prime of their careers. Facing financial hardship, the company has done a 180 and is now looking to recent college grads to fill those roles.
Previously, Netflix also relayed that it would be beginning to rely on ad partners as an extra source of revenue. This strategy is twofold. Primarily, the company would be able to accrue extra profit by leveraging ads. However, this maneuver also allows Netflix to offer potential viewers a cheaper plan subsidized by ads. In doing so, the company hopes to win back some subscribers who left due to how much the service cost per month.
This also puts Netflix in a better place to compete with lower-cost streaming services like TV+ and Disney+. For instance, Apple offers TV+ for just $4.99 per month. Overall, If it works out, this strategy could prove to be a double win for the streaming giant.
On the content side of things, Netflix is being more careful about how much money it’s laying out too. The Wall Street Journal reported that the company told its content creators to be careful about the number of licenses they are paying for. This is a big change for a company that had a reputation for green-lighting every project under the sun.
Netflix is smart for taking measures to reduce its spending now. The company is going through growing pains and it needs to learn how to navigate obstacles and challenges as they arise. It’s easy to forget, but Netflix as a company is still relatively young. This is the first real hiccup that it’s had to contend with after being seemingly unstoppable for about a decade. The streaming industry is just starting to mature now and Netflix needs to learn how to mature with it in order to stay as a relevant player in the space that it pioneered.
