Netflix plans to cut spending by $300 million this year, according to a new report from The Wall Street Journal. The report indicates that part of the reason the streaming giant is looking to cut costs is because it delayed its plans to crack down on password sharing in the US and elsewhere from the first quarter of year to the second quarter, which means Ara’s earnings are expected to move towards the second half of the year.
The company urged staff earlier this month to be cautious with their spending, including in relation to hiring, but noted there would be no hiring freeze or additional layoffs.
A Netflix spokesman declined to comment.
It’s worth noting that while Netflix plans to cut costs by $300 million this year, that number represents a tiny fraction of the company’s overall expenses. For example, Netflix’s operating expenses last year were about $26 billion.
The streaming giant beat estimates of the first quarter of the year but it reported a lighter-than-expected forecast last month. netflix raised his estimate by the amount of free cash flow it aims to generate by 2023 to at least $3.5 billion, up from $3 billion.
Netflix has been exploring new ways to generate revenue. The company launched its crackdown on password sharing in Canada, New Zealand, Portugal and Spain earlier this year. In these countries, Netflix requires paid users to set a primary location for their account. If someone you don’t live with uses your account, Netflix prompts you to “buy an additional membership.” Netflix allows up to two additional members per account for a fee, which varies by country.
Additionally, the company launched a new ad-supported plan called “Basic with Ads” last November. The tier costs $6.99 per month, which is $13 less than Netflix’s Premium plan, nearly $9 less than the Standard plan, and $3 less than the Basic plan. With this plan, Netflix competes with other major streaming services that offer ad-supported options, including Disney+, Hulu, HBO Max, Paramount+, and Peacock.
In an effort to cut costs, Netflix carried out a series of job cuts last year. In May 2022, the company laid off approximately 150 employees. A month later, the company laid off another 300 people, representing about 3% of its workforce at the time. Netflix then laid off 30 more employees in September who were part of its animation department.
Netflix’s password-sharing crackdown is expected to hit the US on or before June 30.
As the streaming industry continues to grow, Netflix Inc. has reportedly decided to cut their spending budget by $300 million this year. This decision highlights the company’s commitment to running a financially sound and cost effective business model. For companies like Netflix who are constantly pushing the boundaries of technology, the estimated savings could result in greater investment into research and development, allowing for platforms like Netflix to remain industry leaders for years to come.
The ramifications of this cut could extend to the industry as a whole. We can assume that a decrease in money spent translates to an increase in efficient pricing. This will be beneficial for consumers as it may help to streamline pricing across all streaming services and products.
At Ikaroa, we’re paying close attention to this shift in the streaming industry. In an industry as advanced and rapidly changing as streaming services, it can be hard to stay up to date. By following changes like this and proactively responding, we plan to remain a leader in the space.