Netflix Tightens Belt... Cuts Costs by 400 Billion Won

Entering Austerity Due to Account Sharing Fee Policy Issues
Plan to Cut Employee Salaries and Benefits

Global online video service (OTT) Netflix is tightening its belt and entering a period of austerity.

The Wall Street Journal (WSJ) reported on the 12th (local time) that Netflix plans to reduce its spending by $300 million (approximately 401.6 billion KRW) this year. This shift toward cutting costs is interpreted as a response to weakened profitability amid fierce competition in the streaming industry.

[Image source=Yonhap News]

Previously, Netflix's policy to charge fees for account sharing, first implemented in New Zealand and then planned for the United States, encountered setbacks. As more subscribers canceled their memberships due to the fees, Netflix decided to postpone expanding the policy to the U.S. and other regions to mitigate the impact.

Sources said that Netflix's move to cut costs was a consequence of delaying the account sharing fee policy, originally scheduled for the first quarter, to after the second quarter.

Earlier this month, company executives conveyed their intention to reduce spending to employees during an internal meeting and urged careful decision-making regarding expenditure plans, including hiring.

However, sources clarified that this directive does not imply a hiring freeze or additional layoffs. It appears the company is leaning toward reducing wages or benefits.

Netflix has previously considered layoffs, downsizing real estate, and changes to the salary structure for certain job categories as part of its cost-cutting measures.

Streaming companies, which have focused on increasing subscriber numbers for some time, are now concentrating on profitability as it becomes increasingly difficult to grow their subscriber base.

While most OTT providers still suffer losses, Netflix has been profitable for several years but has tightened its belt due to concerns about an economic downturn.

At a recent earnings announcement for the first quarter, Netflix raised its free cash flow generation target for this year from $3 billion to $3.5 billion. Last year, after announcing the first subscriber decline in a decade and experiencing a stock price plunge, the company significantly revised its management strategy. Cost-cutting and the introduction of an ad-supported subscription plan are representative examples.

This content was produced with the assistance of AI translation services.