Netflix reportedly aiming to cut costs by US$300m this year

Netflix plans to cut spending by about US$300 million this year, according to a report in the Wall Street Journal, citing unnamed sources.

However, the streamer, while urging staff to rein in expenditure, has said it is not planning to freeze hiring or announce additional layoffs, according to the report.

The company’s decision to implement further cost cuts is linked to its decision to delay the implementation of a plan to crack down on password sharing, according to the report.

In its last quarterly results, Netflix said it had added only 1.75 million net paid subscribers in the first quarter, well under analysts’ expectations.

The streamer’s current expectation of revenues for the second quarter stands at US$8.2 billion, that is only 3% up year-on-year (less than the 4% growth recorded in Q1) and Netflix expects operating income to be flat and operating margin to decline slightly (albeit mostly because of currency movements).

In its Q1 letter to investors, Netflix 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”.

Paid sharing enables users to add extra members to their account or take up a new subscription.

“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.

Netflix co-CEO Greg Peters said the Q2 launch of paid sharing would be “very broad” encompassing “many, many other countries” alongside the US – but would be done in a way that reflects regional sensitivities around pricing.

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