Netflix plans to cut spending by $300 Million following delayed crackdown on Password Sharing

Netflix is reportedly planning to cut its spending by $300 million this year, according to a report from The Wall Street Journal. The move comes as the streaming giant delayed its plans to crack down on password sharing in the U.S. and elsewhere from the first quarter of the year to the second quarter. This means that revenue from the move is now expected to come in toward the second half of the year, prompting the company to look for ways to cut costs.

While Netflix has urged staff to be sensible with their spending, including in relation to hiring, it has noted that there would not be a hiring freeze or additional layoffs. The company beat estimates for the first quarter of the year but reported a lighter-than-expected forecast last month. Netflix raised its estimate for the amount of free cash flow it aims to generate in 2023 to at least $3.5 billion, up from $3 billion.

In an effort to generate revenue, Netflix has launched a crackdown on password sharing in Canada, New Zealand, Portugal and Spain earlier this year. The company also launched a new ad-supported plan called “Basic with Ads” last November. With this plan, Netflix is competing with other major streaming services that offer ad-supported options.

Netflix conducted a series of job cuts last year in an effort to lower costs. In May 2022, the company laid off approximately 150 staffers. A month after that, the company laid off 300 more people, which represented about 3% of its workforce at the time. Netflix then laid off another 30 employees in September who were part of its animation department.

Netflix’s password sharing crackdown is expected to hit the U.S. on or before June 30. While the company plans to cut its spending by $300 million this year, this number represents a small fraction of the company’s overall expenses. Netflix’s operating expenses last year were about $26 billion.

Our take: It seems Netflix is trying to stay afloat, fighting against its growing competitors like Disney+ and Paramount+ and focusing on users who share their account, but it risks to lose the quality of its streaming service. This planned spending review will bring Netflix to cancel more and more shows, and this could be very annoying for users that subscribed to watch those series. Will the platform reach its goal or will subscribers switch to an alternative service?