Netflix is planning to reduce its spending by US$300 million this year, people familiar with the matter told the Wall Street Journal. The streamer is looking to cut costs, in part, because its plans to crack down on password sharing broadly in the United States and elsewhere were pushed back from the first quarter to the second quarter, the people said.
Although company leaders urged staffers to be judicious with their spending, including in relation to hiring, there would be no hiring freeze or additional layoffs, according to the Wall Street Journal report. Shares of the company were down nearly 2% in early trading.
In its last earnings report, corresponding to the first quarter, Netflix added only 1.75 million net paid subscribers, well under analysts’ expectations.The streamer’s current expectation of revenues for the second quarter stands at US$8.2 billion, which is only 3% up year-on-year, while it also expects operating income to be flat and operating margin to decline slightly.
In its Q1 letter to investors, the company said it was “pleased with the most recent launches of paid sharing” – Netflix’s initiative to convert illicit password sharers to legitimate subscribers – but said that “the latest learnings” from the programme would take time to translate into changes that would “lead to even better results.”
“To implement these changes, we shifted out the timing of the broad launch from late Q1 to Q2. While this means that some of the expected membership growth and revenue benefit will fall in Q3 rather than Q2, we believe this will result in a better outcome for both our members and our business,” Netflix said.