Netflix starts biggest layoffs in years ahead of quarterly earnings

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Netflix layoffs ahead of earnings

Highlights

Netflix initiated its largest layoffs in years, primarily impacting product, tech, HR, and legal, just before Q3 earnings on October 20.
Netflix shares have fallen over 30% in six months and over 40% year-on-year as management faces investor pressure to accelerate growth.
Despite a March price hike raising the standard ad-free plan to $19.99, Netflix's U.S. TV viewership share declined from 9% in December to 7.8% in July.

Layoff scope and timing before results

As reported by Business Insider, citing The Wall Street Journal, the job cuts, which a person familiar with the plans later confirmed, were reported first by the Journal, with affected employees notified on Wednesday.

The reductions are concentrated primarily in Netflix's product, tech, HR and legal functions. The move comes about a week before the company is due to report third-quarter earnings after the market closes on October 20.

Netflix's last major layoff round was in 2022, after it lost subscribers for the first time in more than a decade. The latest downsizing marks its biggest cutback in years as management tries to improve performance amid investor pressure.

Investor pressure and streaming competition

Co-CEOs Ted Sarandos and Greg Peters are dealing with a stock price that is down more than 30% over the last six months and more than 40% over the past year. At a Bloomberg event in late September, Sarandos said the company is not growing as fast as he wants and is working to accelerate that pace.

Netflix met Wall Street's earnings expectations last quarter but said it would publish its detailed engagement report once a year instead of twice a year. That change unsettled investors because engagement levels are closely tied to subscriber retention and consumers' willingness to accept higher prices.

The company raised prices in March, taking its standard ad-free plan to $19.99 a month from $17.99 and its ad-supported plan to $8.99 from $7.99. Viewership grew 2% in the first half of the year, while Nielsen data shows Netflix accounted for 7.8% of viewing on U.S. TVs in July, below YouTube's 14.2% but ahead of Disney's streaming services at 4.7%.

Even so, Netflix's streaming viewership share has fallen from 9% in December, its highest level in more than five years, when hit shows including "Stranger Things" helped lift engagement. The latest cuts also follow recent layoffs elsewhere in media, including staff reductions at NBCUniversal and Disney.

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