Layoffs at Netflix have some staffers questioning company strategy and culture
At Netflix, it has long been known that an “adequate performance gets a generous severance package.”
The Los Gatos, Calif., company views its roughly 11,300 employees as members of a pro-sports team, in which every player has to be a star performer, or else they’re gone, reflecting what the company calls a “keeper test.” “We’re a team, not a family,” Netflix says of its culture.
But what happens when the entire team’s performance is called into question?
Last week, Netflix said it lost subscribers for the first time in more than a decade, shedding 200,000 subscribers in the first quarter, and it expected to lose 2 million more this quarter. The disclosure unnerved investors, who wondered whether the streaming giant had lost its golden touch. Shares plummeted 35% on April 20, its biggest one-day decline since 2004.
Responding to its dramatic slowdown, Netflix said it would test ways to encourage people to pay for sharing passwords; put out better shows, films and games; and explore a lower-cost, ad-supported version of Netflix — an option the company had long resisted.
But the bleak subscriber numbers and the company’s response have stirred a mix of angst and uncertainty among many rank-and-file workers. Some are worried that the streaming heavyweight may have hired too fast and grown complacent as subscriber growth skyrocketed in the early days of the pandemic.
Others are skeptical about strategic shifts and concerned that Netflix’s distinct culture is fundamentally changing, according to former employees who spoke with The Times and comments posted on a private Netflix group on Blind, an anonymous forum for people with company-verified email addresses.
“Now we find ourselves at a company which increasingly looks like every other large tech company,” one Netflix employee wrote on Blind, citing changes in compensation policies that are said to favor hiring less experienced engineers at lower pay. “Would they still be doing this if they had hired a little more slowly over the last few years? I think not, so where is the accountability for leaders who made the bad decision to over hire?”
An overriding concern for many is job security, which was magnified Thursday when Netflix cut an undisclosed number of marketing-related positions, including from Tudum, a publication dedicated to promoting Netflix content. The pop culture site had been touted by former Chief Marketing Officer Bozoma Saint John, who exited in March. The company said Tudum remained “an important priority.”
After Netflix released its earnings data, some of the workers laid off this week said they had been assured by managers that their jobs were secure.
“We were basically told, ‘Don’t worry about it,’” said one former contractor who declined to be named because they signed a nondisclosure agreement.
Instead, they were told that Thursday was their last day and that they would receive two weeks’ severance.
“They are leaving a lot of people in an extremely bad position that came here to invest in a project that they sold to us,” the contractor said.
Further fueling the anxiety is the effect of the steep stock slide — Netflix shares have dropped 70% this year — on staff compensation. Employees can choose how much of their pay is tied to stock options.
Amid the tumult, rivals have received a surge in job inquiries from Netflix employees, said people familiar with the matter who were not authorized to comment publicly.
“Do you recommend putting work aside for a bit and start interviewing?” quipped one employee on Blind.
Netflix declined to comment for this article.
Netflix cited several reasons for the subscriber loss, including rising competition and password sharing. Executives said they would consider a lower-priced option with ads.
The company has long touted its culture of “radical transparency,” in which people are given freedom to make large spending decisions and take big bets. Employees who don’t live up to Netflix’s high standards either learn from their mistakes or are asked to leave.
“Getting cut from our team is very disappointing, but there is no shame,” according to the Netflix website on its corporate culture. “Being on a dream team can be the thrill of a professional lifetime.”
Despite the tough environment, Netflix earned a reputation for generous compensation packages and its willingness to outspend rivals. Its staff grew aggressively during the pandemic, expanding 20% in 2021.
What’s more, the streamer spent lavishly on content, bankrolled filmmakers and kept a steady flow of deals coming through talent agencies, making it the toast of an industry that’s always looking for deep-pocketed buyers. At the same time, the company’s swagger provoked consternation among executives at the more traditional studios, whose parent companies were under pressure to try to beat Netflix at its own game.
But the recent struggles have been an ego check on the company and its employees. Now that Netflix is the one under Wall Street’s microscope, the era of freewheeling spending is coming to an end. Even perks such as swag from the company store are drawing scrutiny, insiders said.
In a presentation last week, Chief Financial Officer Spencer Neumann said Netflix will be “prudent in terms of pulling back on some of that spend growth to reflect the realities of the revenue growth of the business. ... During this period of slower revenue growth, we’re going to protect our operating margins.”
Even before the Tudum layoffs, several managers have exited the company in recent months, including animation executive Phil Rynda.
Netflix’s stock price plunged 35%, to $226.19, after the streaming giant revealed it lost 200,000 subscribers in the first quarter.
The newfound frugality could reverberate in Hollywood. With so much money having been poured into the space, other players who’ve spent the last four years trying to outdo Netflix may rethink their own priorities.
Some current and former employees say the concerns are overblown. The streaming giant has weathered challenges before, including the shift from DVD rentals to streaming, when Netflix was still primarily a disc-by-mail service. It continued to grow as rival studios, including Disney, yanked their content from Netflix to put it on their own streaming services.
Netflix co-founder and co-CEO Reed Hastings expressed confidence that the company will get through this rough patch and pointed out that Netflix still dominates streaming with 222 million subscribers globally. Its nearest competitor, Disney+, has 130 million.
“Internally, we’re really geared up, and this is like our moment to shine,” Hastings said in an earnings presentation last week. “This is when it all matters, and we’re super focused on achieving those objectives and getting back into our investors’ good graces.”
But some current and former employees are skeptical of the strategy, especially the dramatic pivot to the possibility of an ad-supported subscription option.
“This feels like a huge curveball,” one former employee said.
In 2019, when entertainment executives speculated at Cannes Lions that Netflix would explore adding advertising to its streaming service, Netflix told CNBC it was “wishful thinking from an advertising conference.”
Hastings admitted in last week’s earnings presentation that he had been against advertising, believing it hindered the user experience. But he said he’d since come around to the idea. “I’m a bigger fan of consumer choice,” Hastings said.
A producer who has worked with Netflix and asked not to be identified said, “That felt like a panic move.”
Password piracy and account sharing is expected to cost streamers and pay TV providers $12.5 billion in 2024, according to Parks Associates.
Netflix is frequently a player at the Emmys and the Oscars and has produced critically acclaimed and award-winning programming such as “The Crown” and “The Queen’s Gambit.” Nonetheless, a persistent critique of Netflix is that its TV-style programming and movies often have fleeting relevance and little lasting cultural impact.
There’s growing recognition within Netflix that the company must produce better content as competitors such as Disney and HBO Max make major strides in streaming, people close to the firm said. Because the company releases full seasons of its shows all at once and makes it easy for subscribers to cancel, Netflix needs to release a new hit every month to stay competitive and keep growing, executives have said.
There’s also been criticism from staffers that its content and leadership do not reflect and are not fully inclusive of the transgender community — concerns that were brought up after transphobic language was included in a Dave Chappelle special last year. At the time, some employees staged a walkout and demonstration. Co-CEO Ted Sarandos later told Variety that he “screwed up that internal communication,” but the company kept the special on its streaming service.
“The whole point that was being made was about the fact that there’s millions of people who don’t watch Netflix, who do not pay for Netflix, because there is not enough content on the platform that is engaging to them,” said former Netflix program manager B. Pagels-Minor, who helped lead the protest and was fired after being accused of leaking internal data. Pagels-Minor denied the claim.
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