Netflix's Workforce Reduction: A Strategic Move
Netflix plans to lay off 6% of its workforce, approximately 1,000 workers, four months after acquiring Ben Affleck’s artificial intelligence (AI) company for nearly $600 million.
During the Bloomberg Screentime Conference in late September, co-CEO Ted Sarandos acknowledged that Netflix's growth is not as rapid as desired and expressed efforts to streamline operations. The company's engagement increased by 2% in the last period, prompting them to expand beyond their traditional focus on films and TV series into live programming. Approximately 5% of their $20 billion content budget is being allocated to live programming.
Netflix also aims for larger theatrical releases for some of its biggest films. "Narnia" and "Charlie and the Chocolate Factory" are among the movies getting wide releases, along with the sequel to "KPop Demon Hunters." The company released over 30 movies in theaters last year. Despite these efforts, Netflix's shares have dropped by about 24% this year due to subscription costs.
With approximately 325 million subscribers, Netflix faces challenges in engaging users. After losing its bid to acquire Warner Bros. Discovery Inc., concerns arose about filmmakers leaving for rival studios. Sarandos downplayed these concerns, attributing departures to individual circumstances rather than a broader trend.
Netflix's AI investment is on the rise. In March, they acquired InterPositive, an AI filmmaking technology company founded by actor and director Ben Affleck, for $587 million. Affleck's startup, launched in 2022, was kept confidential until then. This technology enables filmmakers and directors to build AI models using production dailies to enhance post-production tasks such as mixing, relighting, and visual effects. Sarandos revealed that roughly 300 of Netflix's titles utilized some form of generative AI this year.
A memo obtained by CNBC revealed that the layoffs primarily affect product, legal, tech, and human relations teams. The last major round of layoffs occurred in 2022, letting go of approximately 450 employees. The memo stated, "Our business is strong and growing, and we remain on track to deliver our full-year forecast. [...] We'll continue to invest aggressively in high-impact areas [...] while making focused choices across the business."
Netflix introduced a new AI discover tab, allowing users to explore content through curated themes based on mood, viewing preferences, and time availability. Themes include "something light," "scare me," "family movie night," "quick watches," and more. This feature, powered by a new intelligence layer, learns and adapts in real-time based on user feedback. It is currently rolling out in the U.S.
In addition to the layoffs, staffing changes include the appointment of Darshan Kantak, a veteran of Google, Snap, Meta, Microsoft, and Yahoo, as VP of Netflix's ads platform. Bela Bajaria, Chief Content Officer, was replaced by Peter Rice, a former Disney and Fox executive. Other notable departures include film boss Dan Lin and TV executives Lisa Lang McMullen, James Oh, Carolina Garcia, and Andrew McQuinn, as well as Doug Belgrad, Netflix’s film VP.
Netflix is not alone in cutting costs; Disney announced 300 layoffs, primarily in human resources and technology, while Xbox also conducted layoffs in September. These moves reflect broader trends in the entertainment industry.