Netflix’s total viewing hours rose in the first half of the year, but growth was limited to 2%.
YouTube accounted for 14.2% of U.S. TV viewing time in July, compared with 7.8% for Netflix. Investors are watching for the company’s earnings report on October 20.
Key points
▶ U.S. outlets Puck and the Los Angeles Times reported that Netflix is preparing to cut about 5% of its workforce. Based on the company’s headcount at the end of last year, that would amount to roughly 800 employees. The scale and timing of any layoffs have not been finalized.
▶ Netflix’s total viewing hours in the first half of this year reached a record for a six-month period, but increased by only about 2% from the same period last year. How much further the company can grow viewing time, apart from revenue growth, has become a focus for investors.
▶ According to Nielsen, YouTube accounted for 14.2% of all TV viewing time in the United States in July, while Netflix accounted for 7.8%.
Reports have emerged that Netflix is considering large-scale layoffs. U.S. entertainment outlet Puck reported on October 9 (local time) that Netflix was preparing a restructuring that could affect about 5% of its workforce, and that it could be announced as early as the following week. The Los Angeles Times, citing people familiar with the matter, reported that the cuts could affect around 800 employees. Netflix did not comment in response to requests for confirmation from either outlet.
About 800 is not a confirmed figure
According to documents Netflix filed with the U.S. Securities and Exchange Commission, the company had about 16,000 full-time employees worldwide at the end of last year. Five percent of that total would be 800 employees.
Puck estimated Netflix’s current workforce at about 17,000 and calculated that the cuts could affect roughly 850 employees. The actual number of layoffs and the regions that would be affected have not yet been disclosed.
The Los Angeles Times predicted that creative teams involved in film production could also be affected. Netflix is scheduled to report its third-quarter results on October 20. If the reported plan is announced the following week, details of the restructuring would emerge before the earnings report.
Viewing time is up—but growth is the issue
Netflix reported more than 97 billion hours of viewing in the first half of this year, a record for a six-month period. This does not mean that users have begun watching Netflix less.
However, viewing hours increased by only about 2% compared with the same period last year. Investors are concerned that viewing time is not growing as quickly as the company’s spending on content.
Netflix co-CEO Ted Sarandos also said recently at a Bloomberg event that viewing-time growth was not reaching the level he would like. Netflix has maintained that live programming can attract new subscribers, even if it accounts for only a small share of viewing hours.
According to audience measurement firm Nielsen, YouTube accounted for 14.2% of all TV viewing time in the United States in July, while Netflix accounted for 7.8%. The two figures compare TV viewing time in the United States.
Game studio closures add to layoff speculation
Netflix closed its Hollywood game studio Night School in August. Its Moonloot studio in Helsinki, Finland, is also in the process of being shut down. These moves can be seen as a reassessment of returns on investments in businesses the company had expanded into across several areas.
The company’s plans for a major acquisition also changed this year. In December last year, Netflix agreed to acquire Warner Bros. Discovery’s film and television production divisions and streaming business. But after Paramount Skydance made a higher offer, Netflix decided in February not to raise its bid. Paramount completed its acquisition of Warner on October 6.
Netflix shares were about 43% lower than a year earlier at the close of trading on October 9, when reports of the possible layoffs emerged. The decline reflects a mix of factors, including growth prospects and the acquisition battle.
After losing subscribers in 2022, Netflix laid off about 450 full-time employees in two rounds. If the cuts now being reported materialize, they would represent a larger workforce reduction than those made at the time.