Netflix is ​​chasing cost-cutting, from cloud computing to corporate swag

From reducing its real estate footprint and curbing corporate swag to controlling cloud computing costs and hiring more junior staff, the streaming giant is taking a variety of measures to reduce spending, those familiar with the situation say Persons.

Netflix said it lost nearly a million subscribers in the June quarter, citing increased competition. The company has laid off more than 400 employees this year and said it would keep its spending on new film and television programming steady. But the cost-cutting effort goes deeper, touching most corners of the business, as the company imposes greater financial discipline.

For companies under financial pressure, tightening their belts is the order of the day. At Netflix, where cost control has been a lower corporate priority for years, the newfound attention to spending on things big and small marks a cultural shift.

According to people familiar with this work, Netflix is ​​trying to better control rising cloud computing costs with longtime cloud partner Amazon Web Services. Netflix is ​​looking to keep costs from skyrocketing as it seeks to grow its subscriber base to as many as 500 million customers worldwide over the next three years, these people said.

Among the changes Netflix is ​​investigating is reducing the number of copies of data and content it stores around the world, the people said. Netflix has long invested heavily in cloud and network infrastructure, and has viewed the reliability of its service as a key selling point.

Netflix is ​​hiring more junior staff, from interns to recent college graduates, as part of an expanded recruitment initiative for “emerging talent,” people familiar with the program said. Previously, the company had generally recruited experienced employees, especially for engineering jobs. The change means the company can spend fewer salaries on some positions and ensures skilled employees can focus on complex tasks as the company grows, people close to the company said.

Spending on perks is also curbed. The company last year limited the Netflix-branded merchandise, including coffee mugs, sweatshirts and baby onesies, that employees can order. After years of unlimited orders, employees are now limited to ordering $300 worth of goods a year, people familiar with the changes said.

Netflix’s operating expenses rose to $23.5 billion in 2021, up 15% year over year, as more was spent on programming, salaries, and content delivery. The company spends heavily to create movies and TV shows, and has steadily increased its content budget for years.

Spencer Neumann, Netflix’s chief financial officer, said in April Netflix is ​​now trying to scale back content and non-content spending. “We’re trying to be smart and prudent about scaling back some of that spending growth to reflect the realities of the company’s revenue growth,” he said.

Netflix’s subscriber base fell for the first time in nearly a decade, causing the stock to post its worst single-day percentage drop since 2004. WSJ’s Joe Flint walks us through three strategies the company may be trying to continue growing, and what the changes could mean for other streamers. CORRECTION: A previous version of this caption said Netflix’s stock has fallen to its lowest level since 2004.

On the real estate side, Netflix is ​​closing its Salt Lake City office and has told employees there that they will be doing their work remotely, according to people familiar with the matter. Netflix is ​​also giving up space in Los Gatos, California and Los Angeles.

For years, the Salt Lake City office housed a team that handled legal matters, technical research staff that helped Netflix’s customer service organization with bugs and other issues, and a department that helped with the software the company uses to watch movies and shows produced. Netflix outsourced call center functions for customer support a few years ago.

Many Salt Lake City workers were laid off during rounds of downsizing earlier this year, people familiar with the job cuts said.

Netflix’s cost-cutting work extends to software and technical spend. The company has cut some investments in its internally developed original content production software this year. For example, a little-used planning tool that helped plan who should be on set when filming different scenes was discontinued, people with knowledge of these changes said.

Additionally, in recent months, the streamer has advised employees at his studio group to pay more attention to the number of software licenses they pay for, as each one can cost thousands of dollars.

write to Sarah Krouse at sarah.krouse+1@wsj.com

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