According to the latest report, Netflix executives have asked employees to be more careful about spending and hiring in two separate meetings in the past few weeks. The two meetings were a staff meeting on Monday and a management meeting last month in Anaheim, California. This comes at a time when the streaming giant’s subscriber growth has plummeted.
Netflix, known for its massive spending on content and allowing employees to hire as needed, suggests management’s comments suggest the company will be slowing hiring. Netflix World Headquarters has expanded its hiring rate by 59% over the past 3 years, reaching 11,300 by 2021.
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While Netflix executives have advised content teams to be more informed about programming decisions, it’s rare to issue a blanket spending warning to all employees. But Netflix did experience a sustained subscriber slowdown for the first time.
The company’s fourth-quarter subscriber growth was 8.9%, down from 21.9% a year ago, and they expect a further slowdown to 8% in the first quarter ended Thursday. Not only that, but the actual growth rate may be worse than expected due to Netflix suspending service in Russia. It is reported that Netflix told employees that the company has 1 million to 2 million subscribers in Russia.
Moreover, Netflix expects to add only 2.5 million new subscribers globally for the quarter, so losing the Russian market could have a serious impact on subscriber growth at the end of the quarter. Netflix has other reasons to tighten spending. The company has promised Wall Street that its cash burn period is over and that it expects to generate cash this year and beyond.
At the same time, the company faces increased competition from other streaming services, all of which are priced lower than Netflix, which recently raised monthly subscriptions to as much as $20. Subscriber churn, although slightly up, was still within Netflix’s expectations, people familiar with the matter said. Netflix’s stock price plunged in January on expectations of slower subscriber growth. The stock is down 37% this year.
Furthermore, Netflix is also considering a variety of measures to help it offset the impact of slowing subscribers on revenue, including cracking down on people who share accounts. While Netflix has always allowed account sharing, the practice has become more prevalent in the U.S. and around the world than executives expected, according to people familiar with the matter. The move has been in place for a year, however, and was far from showing signs of slowing subscriber growth.
Shared accounts are prominent in overseas regions like Mexico, where people sell Netflix passwords privately. Netflix said it was testing a feature that would let subscribers pay a few dollars a month to share their accounts. The test is underway in Costa Rica, Chile, and Peru. Netflix expects to expand the test to other regions such as Scandinavia, the people said.
Meanwhile, Netflix is working on other projects to improve the subscriber experience. For example, they’re developing a new user interface to provide more personalized recommendations on the start screen, taking into account subscriber viewing habits at different times of the day and at different times of the week.
