Netflix (NFLX.US) plans to lay off about 1,000 employees, accounting for 6% of the total number of employees, and increase cost control efforts at a time when growth is slowing

The Zhitong Finance App learned that streaming giant Netflix (NFLX.US) announced on Wednesday that it plans to cut employees by about 6%, involving about 1,000 people. The layoffs will mainly affect product, technology, legal, and human resources departments. Although the company emphasizes that the current business continues to grow steadily and is expected to achieve annual performance targets, against the backdrop of stagnant user viewing time growth and increasingly fierce competition in the industry, Netflix is further improving operational efficiency by optimizing staffing and resource investment.

According to an internal memorandum obtained by the media, Netflix Co-CEO Ted Sarandos and Greg Peters stated in an email to employees that the company's mission to “entertain the world” is ambitious, and achieving this goal requires more careful prioritization of personnel and resources.

In an email, the two said, “Our business has performed strongly and continues to grow, and we are still expected to meet our full-year performance expectations. We will continue to actively invest in high-impact areas to improve services and further drive growth and innovation.”

However, management also pointed out that in order to continue to create value for members, partners, employees and investors, the company must make more targeted resource allocation decisions in various businesses. Netflix said the company has no further comments other than the information disclosed by the two co-CEOs in an internal memorandum. According to the plan, Netflix will release its latest quarterly earnings report on October 20.

Notably, this layoff comes only a few weeks after Sarandos publicly expressed dissatisfaction with the company's growth rate. At the Screentime conference held at the beginning of this month, Sarandos confessed that Netflix's current growth rate “has not reached the level I had hoped for.”

In recent years, Netflix has faced a contradiction between growth and profitability. On the one hand, the company continues to achieve steady profits and maintain its leading position in the global streaming media industry; on the other hand, the growth in the viewing time of its users has stagnated, and the main driving factors for adding new subscribers come more from cracking down on password sharing and launching lower priced ad-supported subscription packages.

This means that although Netflix has successfully expanded its user base by adjusting its subscription strategy, how to continue to increase user engagement and increase viewing time is still an important challenge facing the company.

At the same time, the competitive landscape in the streaming media industry is also changing. YouTube has long been Netflix's main competitor for users' viewing time. Today, with the completion of the merger between Paramount and Warner Bros. Discovery Channel, the newly established media and entertainment giant Skydance (SKYD.US), is also becoming an important competitor to Netflix. The company plans to integrate its streaming platforms Paramount+ and HBO Max to further enhance its competitiveness in the streaming market.

In order to compete for consumers' limited entertainment time, Netflix has continuously promoted content diversification in recent years, expanding its business into fields such as live sports events, documentaries, and video games, hoping to reduce its dependence on traditional movie and TV drama content. Recently, however, Netflix still lacks phenomenal hits like “Stranger Things” and “The Squid Game” that can spark widespread discussion and significantly drive user growth and viewing time.

In this context, how to increase user stickiness through content innovation while controlling growing operating costs is becoming an important issue that Netflix management needs to balance.

In fact, Netflix isn't the only US media and entertainment company that recently announced layoffs. Last month, Disney (DIS.US) also announced that it will cut about 300 employees, most of which are concentrated in human resources and technical positions, reflecting that the media and entertainment industry is further strengthening cost control.

For Netflix, this layoff shows that even if the company continues to grow profitably, management is re-evaluating the allocation of business resources and investing more capital and manpower in areas that can directly drive product innovation and long-term growth.

As Netflix is about to announce its quarterly results on October 20, investors will focus on the growth of its subscription business, user engagement, advertising business development, and the actual effects of cost control measures to determine whether the company can maintain its growth momentum in the increasingly fierce streaming competition.