Sure, Harvey Weinstein was found guilty this morning.
But there’s someone else far guiltier than him.
Netflix loves to talk about the $17 billion dollars they’re spending this year on content. They love to talk about how many people watched the first two minutes of 6 Underground. And they love to talk about their International growth numbers.
But they don’t like to talk about the firings.
Talk to ten people who started work at Netflix a year ago, and half of them aren’t working there anymore. Talk to ten Producers who were getting nice sized budgets at Netflix a year ago, and hear about how their budgets have been slashed this year by one-third. Talk to ten people who got their valet parking validated a year ago at Netflix and you’ll find five people who didn’t get enough validation stickers to cover the full freight.
Bottom line? Netflix is cutting costs.
It was bound to happen. When you’re a company spending that much, and borrowing that much in bad debt, you’re eventually going to be called upon to make a profit. And when you’ve spend the last three to five years spending like a drunken sailor, you’re going to have to enroll in the twelve step program of Internet start-ups where the first thing to go are the niceties like (a) a big staff, (b) big salaries, (c) catered lunches, (d) first class air travel, (e) AMEX corporate cards, (e) marketing campaigns and more.
Did you read last week how Netflix CEO Reed Hastings sold off a huge amount of his stock and cashed it in? That’s the thing someone does when they’re expecting the stock value to drop some more.
But don’t read into that.
This happens all the time. Look at any tech company that entered into Entertainment and look at their spending for the first three years versus the second three years. The first three years in any technology company is oft considered the time you have to go balls to the wall in order to set yourself up for success and growth. Often times, the first three years show the most year-over-year growth because that’s when no one is looking at the bottom line. It’s spend spend spend so that you can make a splash, establish you’re in the game, and get the best talent you can under your roof.
But when the profit doesn’t come in those first three years, the data scientists and the CFO and the number crunchers start asking questions. It happened at Netflix, it happened at Amazon, it happened at Hulu. The finance people from the Bay Area HQ’s come sauntering down into sunny Los Angeles and start asking questions they clearly don’t know the answers to.
Why did you buy that movie for that much?
Did you expect it would make back it’s money?
Do you have a plan to reach profitability in the next fiscal year?
And when you’re given no choice to reach profitability, you have to start cutting costs wherever you can. And when you’re someone like Netflix who hired everyone in town… When you’re someone like Netflix who thought they needed a thirty-person social media marketing team, or a twenty-five person movie poster-making graphics design division, or someone like Netflix who hired merchandising experts to create toy versions of shows that no one ever heard of…
You fire people.
It’s been fairly quiet. You don’t see articles written about it often. But talk to anyone in the industry and they know at least five people who lost their jobs at Netflix and quietly went away with their nine month guaranteed severance. Talk to executives in HR at Netflix and they’ll tell you that no one should have expected a long tenure at the company, because after all, next to their mantra “Netflix So Funny” is the other one that you hear wandering the halls:
Churn and burn.
Churn people in, churn people out, and burn them until it’s time to send them off on their way.
It’s not like anyone has been surprised. After all, everyone knows from day one at Netflix that their time may be short.
It’s just funny that no one’s talking about just how many people are finding that the length of time they’re being watched at Netflix is barely two minutes at all.