The End of An Era?
The layoffs of several departments were made as a response to the need of reducing expenses instead of the performance of individual employees, according to the company. It is worth noting that the cuts comprise 2% of the U.S. workforce.
As explained on their earnings, the streaming platform's slowing revenue growth means that they have to slow the company's cost growth as well, a Netflix representative said in a statement with CNBC.
The spokespersons said that they are letting go of 150 employees based in the U.S. adding that, " These changes are primarily driven by business needs rather than individual performance, which makes them especially tough as none of us want to say goodbye to such great colleagues."
The company assured that they are " working hard" to support the laid off workers through a "very difficult transition."
Besides the layoff of 150 full-time workers, the company will also be letting go of 70 part-time jobs in their animation studio and eliminate freelance roles in their social media and publishing group.
A report by Variety found that several animated projects - such as "Antiracist Baby," a cartoon for preschoolers, "Wings of Fire," which shall be produced by Ava DuVernay, and "With Kind Regards From Kindergarten" - were all canceled by Netflix.
This decision is in line with Netflix reporting a loss of 20,000 subscribers during the first quarter of the year, the first loss in more than a decade.
Rethinking the Business Model
The streaming company is now rethinking its business model, which has been focused on providing a plethora of commercial-free content and a premium price of $15.49 a month for standard subscription.
Unlike other companies, Netflix has been providing more jobs during the pandemic since the demand for online streaming has increased during that time. Based on last December's data, the company had 11,300 full-time employees and the recent layoffs comprise 1% of the global workforce.
The cuts on Tuesday come after the layoffs of about 25 employers in Netflix's marketing group, particularly its Tudum fan-focused content team.
According to Netflix's Q1 earnings, they posted a revenue of $7.87 billion, which is below Wall Street's estimate of $7.93 billion. However, this was a 9.8% increase compared to last year's Q1 with a 24% revenue growth due to pandemic gains.
CFO Spencer Neumann said that they will protect their operating margins, particularly maintaining a margin of around 20% for 2022. He also noted while they pulled back their spending growth "across both content and non-content spend," they will continue growing it and invest in long-term opportunities.
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Written by Joaquin Victor Tacla
