Netflix plans to cut its spending by $300 million this year. The Wall Street Journal reported on Friday, citing people familiar with the matter. The streaming group is continuing its efforts to improve profitability in a competitive market, the paper said.
According to the report Netflix is looking to cut costs in part because it has delayed plans to limit password sharing in the U.S. and elsewhere from Q1 to Q2. This change is expected to result in new revenue, which will now only be reflected in the second half of the year. According to Netflix, more than 100 million households do not pay for Netflix because they share accounts with other households.
Management also urged employees to be careful with their spending, including on new hires, but said there would be no hiring freeze or additional layoffs, the report said.
Disappointing user growth
Though Netflix plans to cut costs by $300 million this year, that number represents only a small portion of the company’s overall spending. Netflix’s operating costs last year were around $26 billion. Last month, Netflix beat estimates for the first quarter but disappointed on user growth and issued a weaker-than-expected guidance. According to observers, this illustrates the challenges on the way to growth for the group.
As Netflix faces signs of market saturation, the streaming provider is looking for new ways to make money. These include password enforcement and a new ad-supported service. The streaming service earns more with advertising subscribers than with standard users.
Restrictions come later
Restrictions on so-called account-sharing were set to come this spring, when Netflix said it delayed the broader rollout of a plan to combat illicit password sharing to Q2 to make improvements. Netflix is expected to take action against password sharing on or before June 30.
Netflix has also made a number of job cuts over the past year in an effort to cut costs. In May 2022, the company laid off about 150 employees. A month later, the company laid off 300 more employees, about three percent of the workforce at the time. In September, Netflix laid off another 30 employees who were part of the animation department.
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