Netflix has long known that “fair performance gets generous compensation.”
The Los Gatos, Calif.-based company views its roughly 11,300 employees as members of a pro sports team where every player has to be a star or they’re gone, reflecting what the company calls a “keeper test.” “We’re a team, not a family,” Netflix says of its culture.
But what happens when the performance of the entire team is questioned?
Last week, Netflix said it lost subscribers for the first time in more than a decade, losing 200,000 subscribers in the first quarter and expecting to lose another 2 million this quarter. The revelation unsettled investors, who wondered if the streaming giant had lost its golden touch. Shares plunged 35% on April 20, the biggest one-day drop since 2004.
In response to the dramatic slowdown, Netflix said it will test ways to encourage people to pay to share passwords; release better shows, movies, and games; and explore a cheaper, ad-supported version of Netflix — an option the company had long resisted.
But the dismal subscriber numbers and the company’s response have caused a mixture of fear and uncertainty among many ordinary workers. Some are concerned the streaming heavyweight may have shut down too quickly and become complacent as subscriber growth skyrocketed in the early days of the pandemic.
Others are skeptical about strategic changes and concerned that Netflix’s distinct culture is fundamentally changing, according to former employees who spoke to The Times and posted comments in a private Netflix group on Blind, an anonymous forum for people with company-verified E -Email addresses.
“Now we’re in a company that’s increasingly looking like any other big tech company,” a Netflix employee wrote on Blind, citing changes in compensation policies that are said to favor hiring experienced engineers at lower wages. “Would they still be doing this if they had been hiring a little more slowly over the past few years? I don’t think so, so where is the responsibility for executives who made the bad decision to hire too much?”
A top concern for many is job security, which was reinforced Thursday when Netflix cut an undisclosed number of marketing jobs, including from Tudum, a publication dedicated to promoting Netflix content. The pop culture site had been touted by former chief marketing officer Bozoma Saint John, who quit in March. The company said Tudum remains “an important priority”.
After Netflix released its earnings, some of the workers laid off this week said they were reassured by managers that their jobs were safe.
“We were basically told, ‘Don’t worry about it,'” said one former contractor, who declined to be named because he signed a nondisclosure agreement.
Instead, they were told Thursday was their last day and they would receive two weeks’ severance pay.
“They are leaving a lot of people in an extremely bad position who came here to invest in a project that they sold to us,” the contractor said.
Concerns are further fueled by the impact of the steep stock slide — Netflix shares are down 70% this year — on employee compensation. Employees can choose how much of their salary is tied to stock options.
Amid the uproar, competitors have received a spate of job requests from Netflix employees, people familiar with the matter who were not authorized to comment publicly said.
“Do you recommend putting work aside for a bit and starting interviewing?” one employee quipped on Blind.
Netflix declined to comment on this story.
The company has long touted its culture of “radical transparency,” in which people are given the freedom to make big spending decisions and place big bets. Employees who don’t live up to Netflix’s high standards either learn from their mistakes or are asked to leave.
“Being dropped from our team is very disappointing, but it’s no shame,” the Netflix website said of its corporate culture. “Being on a dream team can be the thrill of a professional life.”
Despite the tough environment, Netflix has earned a reputation for generous compensation packages and its willingness to outperform its peers. The workforce grew aggressively during the pandemic, growing 20% in 2021.
Additionally, the streamer spent lavishly on content, funded filmmakers, and secured a steady stream of deals from talent agencies, making it the toast of an industry always on the lookout for well-funded buyers. At the same time, the company’s boast sparked consternation from executives at more traditional studios, whose parent companies were under pressure to beat Netflix at their own game.
But the recent struggles have been an ego check for the company and its employees. Now that Netflix is under Wall Street’s scrutiny, the era of free-running editions is coming to an end. Even perks like corporate store swag are under scrutiny, insiders said.
In a presentation last week, CFO Spencer Neumann said Netflix “will be cautious about scaling back some of that spending growth to reflect the realities of the company’s revenue growth.” … During this period of slower revenue growth, we will protect our operating margins.”
Even before the layoffs at Tudum, several executives have left the company in recent months, including animation director Phil Rynda and Philip Fisher-Ogden, director of engineering.
Newfound frugality could resonate in Hollywood. With so much money pouring into the space, other players who’ve spent the last four years trumping Netflix might be reconsidering their own priorities.
Some current and former employees say the concerns are overdone. The streaming giant has faced challenges before, including moving from DVD rentals to streaming, when Netflix was primarily a disc-by-mail service. It continued to grow as rival studios, including Disney, ripped their content from Netflix to put on their own streaming services.
Netflix co-founder and co-CEO Reed Hastings expressed confidence that the company will weather this difficult period, noting that Netflix still dominates streaming with 222 million subscribers worldwide. Its closest competitor, Disney+, has 130 million.
“Internally, we’re really poised and this is our moment to shine,” Hastings said in an earnings presentation last week. “Everything matters here, and we are very focused on achieving those goals and getting back into our investors’ good graces.”
However, some current and former employees are skeptical of the strategy, particularly the dramatic reversal of considering an ad-supported subscription option in an earnings presentation.
“It feels like a giant curveball,” said a former employee.
In 2019, when entertainment executives at the Cannes Lions speculated that Netflix was considering adding advertising to its streaming service, Netflix told CNBC it was “wishful thinking from an advertising conference.”
Hastings admitted in last week’s earnings presentation that he opposed advertising because he believed it hindered user experience. But he said he’s since had the idea. “I’m a bigger fan of consumer choice,” Hastings said.
A producer who worked with Netflix and asked not to be named said, “It felt like a panic attack.”
Netflix is a regular at the Emmys and Oscars and has produced critically acclaimed and award-winning programs like The Crown and The Queen’s Gambit. Nonetheless, Netflix has received persistent criticism that its TV-style programs and films are often of fleeting relevance and little lasting cultural impact.
There’s a growing realization within Netflix that the company needs to produce better content as rivals like Disney and HBO Max make big strides in streaming, people close to the company said. Because the company releases entire seasons of its shows at once and makes it easy for subscribers to cancel, Netflix needs to release a new hit every month to stay competitive and continue to grow, executives said.
There has also been criticism from staff that its content and leadership does not reflect and fully include the transgender community – concerns raised after transphobic language was included in a Dave Chappelle special last year. At that time, some employees staged a strike and a demonstration. Co-CEO Ted Sarandos later told Variety that he “screwed up those internal communications,” but the company kept the special on its streaming service.
“The key point that was raised was the fact that there are millions of people who don’t watch Netflix, who don’t pay for Netflix, because there isn’t enough content on the platform that appeals to them,” the former Netflix said Program manager B. Pagels-Minor, who led the protest after being accused of leaking internal data. They denied the allegation.