Members of Netflix’s executive leadership have said the company will seek to rein in spending and enforce more financial discipline across its operations following disappointing financial results in the first quarter of the year — reports The Wall Street Journal.
In its Q1 2022 earnings call on Tuesday, Netflix reported a net loss of 200,000 paid subscribers — the streamer’s first subscriber loss in 10 years. The news sent shares plummeting 25% in what was the stock’s second-worst one-day decline ever, wiping out $54 billion USD in market value.
“Well, it’s a bitch,” Netflix Chairman and Co-Chief Executive Reed Hastings reportedly said about the results while addressing employees in a town hall on Wednesday afternoon.
Netflix’s first-quarter results are a reality check for the company — the platform is bleeding subscribers to other services, and execs even blamed password-sharing for putting a damper on earnings. It looks like Netflix’s days of carefree spending on programming are coming to an end.
Over the course of the last year, the streaming giant put out 500 original titles. Netflix will now look to add fewer titles while placing greater importance on quality, according to sources abreast of the company’s strategy.
Netflix is reportedly reworking production deals to limit its risk, which producers and showrunners used to extravagant spending from the company are not taking too kindly to. Sources say the streamer is prioritizing programs with the biggest return, not the greatest reach. A key internal metric at Netflix is the ratio of a program’s viewership to its budget.
“We should right-size budgets depending on what the creative dictates, and what the size of the audience is,” said Bela Bajaria, the head of global TV for Netflix, in a recent interview.
Netflix had to reach deep into its pockets back when it started making original content and had to bid on high-profile shows like House of Cards, but that was before the streamer had established itself in original programming. “That was the cost of entry, the cost of doing business,” said Bajaria.
According to company executives, Netflix still expects to grow spending on content to more than $20 billion over the course of this year, but it will do so while assessing its budgeting more closely. That doesn’t mean the service will cheap out on production, Said Bajaria. “We’re always going to make great shows and have the amount of money needed for the creator’s vision,” she said.
The streamer may also look to supplement its income from subscribers and attract more cost-conscious viewers in a single move by adding lower-priced, ad-supported subscriptions, Hastings said during Tuesday’s earnings call. Netflix has also hinted at plans to “monetize” password-sharing among its customers.
In addition to cutting back on the money it pours into original programming, Netflix will also look to lower its costs when licensing shows it doesn’t own from outside studios and production companies. An executive from one studio with multiple shows at the streamer said that in some cases Netflix wants to reduce spending on licensing for new shows by as much as 25%.