Netflix plans to cut spending by $300 million to boost profitability

It’s no secret that over the past few years, Netflix has been hard at work trying various ways to reduce operational costs and generate more revenue. Now, according to a report from the Wall Street Journal, Netflix plans to reduce its spending by $300 million this year to boost profitability in the face of intense competition.

During a recent internal meeting, leaders encouraged Netflix employees to be cautious with their spending, particularly in terms of hiring. However, there are reportedly no plans for a hiring freeze or more layoffs.

While this cost-cutting measure is a step in the right direction, it represents only a small fraction of Netflix’s $26 billion spending last year. Therefore, the company is also seeking new ways to control and limit expenses, such as reducing its real estate footprint and altering salary ranges. Moreover, the company also increased its estimated free cash flow last month from $3 billion to at least $3.5 billion in 2023.

Netflix’s plan to generate more revenue

This decision comes after the company experienced its first-ever subscriber loss in a decade and the subsequent stock drop, which prompted significant strategy changes, including the crackdown on password sharing in countries like Canada, New Zealand, Portugal, and Spain. Under this new rule, paying users will need to set a primary location for their account, and if someone using the account does not live at the primary location, Netflix will charge them. Currently, the company allows up to two extra members per account for a fee.

Moreover, in an effort to make Netflix appeal to more people, the company also introduced a new ad-supported plan called “Basic with Ads,” which costs $6.99 per month. This puts Netflix back in competition with other streaming services, such as Disney+, Hulu, HBO Max, Paramount+, and Peacock, which also offer ad-supported options.