Netflix Reportedly Cutting 2023 Spending by $300 Million Amid Slowing Growth

Netflix (NYSE: NFLX) is reportedly looking to cut its spending by $300 million in 2023 amid slowing growth and a delayed password-sharing crackdown. Rival Disney is also looking to cut costs as streaming companies shift focus from subscriber growth to profitability.

The Wall Street Journal reported that earlier this month, Netflix asked employees to be frugal with spending even as it stressed that there won’t be any new layoffs or a blanket hiring freeze.

Notably, last year Netflix made some key strategic decisions after its subscribers fell in the first half of the year. Firstly, it launched an ad-supported tier at $6.99 in North America – which was quite a U-turn for the company as it always spoke against ads on streaming platforms.

Secondly, it started to crack down on password sharing and said that an estimated 100 million households watch its content on shared passwords.

Netflix started to crack down on password sharing in Latin America last year and the idea was to roll out the feature to all markets gradually.

It expanded the password-sharing crackdown to Canada in the first quarter of 2023 and said that the feature would be rolled out in the US in the second quarter.

During the first quarter earnings call, Netflix said “While we could have launched [paid account sharing] broadly in Q1, we found opportunities to improve the experience for members. We learn more with each rollout and we’ve incorporated the latest learnings, which we think will lead to even better results.”

Meanwhile, the Wall Street Journal reported that Netflix might delay the feature to the second half of the year.

Netflix Plans to Cut Spending Amid Slowing Growth

Netflix added 1.75 million paying subscribers in the first quarter of 2023 and ended the quarter with 232.5 million subscribers.

The company has stopped providing guidance for subscribers but its Q1 2023 subscriber add fell short of estimates.

Netflix meanwhile increased the full-year free cash flow guidance by $500 million to $3.5 billion.

• Read our guide on buying Netflix stock

Notably, after chasing subscriber growth for the last many quarters, streaming companies are now focusing on profitability.

Disney+ for instance lost 1.37 million subscribers in the quarter that ended April 1 and had a total of 161.8 million subscribers.

After Bob Chapek took over as Disney CEO the company withdrew its streaming subscriber forecast – previously it was targeting subscribers between 215-245 million by the fiscal year 2024.

Like Netflix, Disney is also focusing on profitability and its streaming losses have more than halved over the last two quarters.

Disney to “Rationalize” Spending

Meanwhile, after announcing mass layoffs, Disney is now looking to “rationalize” content spending.

The competition in the streaming industry has intensified which coupled with an uptick in overall costs has put pressure on the profits of incumbents.

Meanwhile, streaming giants like Netflix and Disney have now decided to pick profits over revenue growth and are looking to cut costs further.

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