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Big Changes Coming to Netflix After Catastrophic Earnings
Christian Hetrick
Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.
After disrupting the film and television industry, Netflix is about to undergo some disruption itself.
The streaming service announced Tuesday that some big changes are on the way after a disastrous first quarter that sank its share price in after-hours trading. In response, the company vowed to crack down on password sharing—a longstanding issue that Netflix has largely ignored until recently—and co-CEO Reed Hastings all but confirmed that it will finally add an advertising-supported subscription option. The company is even “pulling back” on its spending growth to reflect its new financial reality.
“When we look at the last 20 years…we've gone through a lot of changes, and we've always figured them out one by one,” Hastings said on Netflix’s earnings call Tuesday. “We have a bunch of opportunity to improve, but coming out the other side, I’m pretty sure we'll look at this as really foundational in our continued journey.”
Netflix shares cratered after investors learned that the streaming platform had lost subscribers for the first time in more than a decade last quarter—with its stock price down nearly 26% in after-hours trading, to under $259 per share. Netflix not only shed 200,000 subscribers from January through March, but said it expects to lose 2 million more in the current second quarter.
Part of the problem was that the company lost 700,000 subscribers after suspending its service in Russia, in protest of that country's invasion of Ukraine. But even excluding its Russian retreat, Netflix would have added only 500,000 paying customers last quarter—well below the 4 million it added in the year-earlier period, as well as the 2.5 million it had previously projected for the first quarter.
Netflix management told shareholders Tuesday that COVID-19 had clouded its outlook; the pandemic turbocharged growth in 2020 as consumers were stuck at home, leaving company leaders believing the subsequent slowdown was only a pandemic hangover.
Now, Netflix is acknowledging what many observers have long speculated: The original streaming giant has been battered by the streaming wars. After being caught flat-footed by the rise of streaming, legacy media giants like Disney and Warner Bros. Discovery have joined the market that Netflix essentially created, offering content and pricing that is often as good, if not better.
In a letter to shareholders, Netflix placed much of the blame on password sharing, estimating that 100 million households may be using accounts without paying for them. (The company has 222 million paying customers globally.) Netflix management said it sees a “big opportunity” to monetize those non-paying households.
The problem is “not a new thing,” Hastings acknowledged. Indeed, account-sharing as a percentage of its paying membership hasn’t changed much over the years, Netflix reported Tuesday, and may have even helped fuel its growth by getting more people to use the app. But coupled with other factors, Netflix now believes it is a major headwind—and with new user growth now at a standstill, the day of reckoning for password-sharing may soon be arriving.
The same can be said for Netflix’s resistance to advertisements. Despite other streaming services luring customers with cheaper ad-supported options, Netflix hasn't budged when it comes to commercials—until now.
“Those who have followed Netflix know that I've been against the complexity of advertising and a big fan of the simplicity of subscription,” Hastings said. “But as much as I'm a fan of that, I'm a bigger fan of consumer choice, and allowing consumers who would like to have a lower price and are advertising-tolerant get what they want makes a lot of sense.”
Other changes may also be on the way. Netflix may have popularized “binge-watching” by giving consumers entire seasons of shows all at once, but some industry observers believe that approach fuels cancellations, since consumers can plow through a show then ditch the service before their next monthly bill.
Netflix plans to release the upcoming season of the fan favorite “Stranger Things” in two parts, which could keep some customers subscribed to the platform for a bit longer. Co-CEO Ted Sarandos described the approach as “satisfying for the binger or the one-at-a-time viewer as well.” He also spoke positively of Netflix releasing some unscripted shows in “mini-batches” on a weekly basis.
One place where Netflix doesn’t seem ready to budge is live sports, though Sarandos didn’t completely close the door on that one, either.
“I'm not saying we'd never do sports, but we'd have to see a path to growing a big revenue stream and a big profit stream with it,” he said.
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Christian Hetrick
Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.
From AI to Layoffs, Here's Why College Grads No Longer Want Tech Jobs
09:12 AM | May 31, 2023
Evan Xie
A new report in Bloomberg suggests that younger workers and college graduates are moving away from tech as the preferred industry in which to embark on their careers. While big tech companies and startups once promised skilled young workers not just the opportunity to develop cutting-edge, exciting products, but also perks and – for the most talented and ambitious newcomers – a relatively reliable path to wealth. (Who could forget the tales of overnight Facebook millionaires that fueled the previous dot com explosion? There were even movies about it!)
But aside from the intensity and hype around employment-eradicating AI apps, the big tech story of 2023 has been downscaling, belt-tightening, and massive layoffs. So far this year, tech companies have laid off thousands of workers, while cutting back on compensation packages, fringe benefits, and some of the other amenities and perks that made these jobs so sought after in the first place.
According to data compiled by Bloomberg, tech has shed nearly 200,000 jobs just since October, more than twice the number of layoffs that have hit the financial sector. Additionally, data on industry pay from Levels.fyi suggests that overall compensation packages within the industry have dipped as much as 25% in the past year. The rate at which these layoffs are happening also doesn’t seem to be slowing down very much, and may still even be increasing month-over-month.
Layoffs aren’t just bad PR that make current employees nervous and potential new hires dubious. They also mean there are simply fewer hands on deck at these companies to collaborate on important jobs; major rounds of layoffs also mean more work for the employees who got to keep their gigs. Meta, Amazon, Alphabet, and Twitter have all massively reduced the size of their workforce, including teams that deal with important time-sensitive tasks, such as fact-checking or community moderation. Those jobs don’t stop needing to be done because the people doing them got laid off; it’s just now more work for fewer staffers.
Many tech companies also rely on the promise of lucrative stock options when recruiting top graduates with significantly in-demand skills. But with tech stocks slumping in 2022, and bouncing back this year mainly on the backs of the AI craze, embarking on a new career with a brand like Meta or Amazon suddenly seems less appealing than it did just a few years ago.
According to Insider, anecdotal evidence from job forums like Blind and other communities such as Reddit also indicate that the “rise-and-grand” hustle mindset so prevalent in the industry – which became synonymous with tech culture during the last startup wave – has led to widespread stress, discontent, and burnout among employees, many of whom are purposefully seeking jobs outside the industry now that the big paydays are also drying up. The Washington Post reported that disaffected Amazon employees in Seattle – fed up with layoffs, return-to-office mandates, and some of the company’s other practices – are currently attempting to organize a mass walkout.
Within the tech industry, the massive hype around AI has been something of a reprieve from this torrent of bad news. But from the perspective of young people considering careers in tech, the industry’s love affair with thinking machines may also be triggering some concerns about the future.
In late April, Dropbox announced it would lay off 500 employees – around 16% of its total workforce – and use the savings to build out an AI division instead. CEO Drew Houston explained that “I’m determined to ensure that Dropbox is at the forefront of the AI era.” IBM CEO Arvind Krishna echoed a similar sentiment in May, suggesting that his company will pause hiring for roles that could potentially be replaced with AI in the near future. He suggested, over the next five years, IBM will likely replace 30% of its employees – around 7,800 people – with apps.
It shouldn’t be that terribly surprising when young people develop cold feet about entering an industry that’s already decided they’re irrelevant, with CEOs simply biding their time before they can fire everyone working on the floors below them. But even beyond the personal stakes, it’s also possible that young people are turning their backs on technology due to a reputational downgrade.
That said, some tech firms dominate both the top and bottom of Axios Harris’ annual “brand reputation survey,” which investigates how American adults feel about various companies. IN particuar, tech companies that produce tangible products or offer vital services continued to perform very well on the survey, with Samsung, Amazon, Apple, and Sony receiving positive appraisals from about 80% of surveyed adults. Conversely, social media and related internet companies – including Google, TikTok, Meta, and Twitter – found themselves near the bottom of the list, with reputation scores around the 60% line. That’s around the same level as bankrupted crypto exchange FTX.
Anecdotally too, it appears that many recent grads who would otherwise be pursuing careers in tech are moving over to the banking industry instead. As one global talent partner told Bloomberg, while tech course-corrects by dropping tens of thousands of workers, “on Wall Street, you work really hard and you make a lot of money. That’s the deal.”
In light of this moment, JPMorgan Chase, in particular, has ratcheted up its recruiting. The company’s workforce jumped 8% in the first quarter of 2023 vs. one year ago. All other factors aside, many of the top college grads are simply going to follow the money. Right now, that’s clearly leading them to the financial sector.
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Lon Harris
Lon Harris is a contributor to dot.LA. His work has also appeared on ScreenJunkies, RottenTomatoes and Inside Streaming.
Family of Former Activision Employee Drops Wrongful Death Lawsuit
12:25 PM | June 01, 2022
Activision Blizzard Logo Under Microscope
The family of Kerri Moynihan, an Activision Blizzard employee who died by suicide during a company retreat in 2017, have reportedly dropped their wrongful death lawsuit against the Santa Monica-based video game publisher.
Paul and Janet Moynihan originally sued Activision in March, alleging that sexual harassment their daughter experienced at work was a “significant factor” in her death. The Moynihans subsequently requested to drop the lawsuit on May 6, Axios reported on Tuesday, and asked that it be dismissed “with prejudice,” meaning that they can’t sue again.
Attorneys at Los Angeles-based firm Isaacs Friedberg, which represented the Moynihan family, and representatives for Activision did not immediately return requests for comment.
Kerri Moynihan was found dead in her Disneyland hotel room during an Activision company retreat in April 2017. The former finance manager was 32 years old.
Moynihan’s experiences at Activision were referenced in the California Department of Fair Employment and Housing’s ongoing workplace harassment lawsuit against Activision, though she was not named in the DFEH’s complaint last July. Both the state’s complaint and the Moynihan family’s lawsuit alleged that she was the subject of sexual harassment at work, including having pictures of her genitalia passed around by co-workers at a company holiday party in December 2016.
The Moynihan family’s lawsuit also alleged that Kerri had a sexual relationship with her boss, former Activision senior finance director Greg Restituito, and that Restituito lied to detectives investigating Moynihan’s death by failing to disclose their relationship.
The Moynihan family’s complaint was one of numerous sexual harassment lawsuits filed against Activision by current and former employees, who have alleged a workplace that was particularly toxic for women. Last fall, Activision CEO Bobby Kotick faced calls for his resignation from employees and shareholders after the Wall Street Journal reported that Kotick knew of alleged sexual assaults at the company but failed to inform Activision’s board. Activision has disputed the Journal’s reporting, claiming that there is “no evidence“ that senior executives including Kotick “ever intentionally ignored or attempted to downplay the instances of sexual harassment that occurred and were reported,“ the company said in a statement to dot.LA.
Activision is currently in the midst of being acquired by Microsoft in a deal valued at $69 billion. The transaction, which is pending regulatory approval, would be the gaming industry’s largest-ever merger.
The National Suicide Prevention Lifeline can be reached at (800) 273-8255 or by texting HELLO to the Crisis Text Line at 741741.
Update, June 2: This story has been updated to include comment from Activision on the Wall Street Journal allegations against CEO Bobby Kotick.From Your Site Articles
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Samson Amore
Samson Amore is a reporter for dot.LA. He holds a degree in journalism from Emerson College. Send tips or pitches to samsonamore@dot.la and find him on Twitter @Samsonamore.
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