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How to interpret the latest round of job cuts – quartz

Like a well placed karate chop Stranger Things Season 4 fan favorite Murray Bowman (played by actor Brett Gelman), Netflix is ​​cutting jobs. The company is eliminating an additional 300 staff after cutting 150 jobs in May. These latest round of layoffs, first reported by Variety, primarily affect the company’s US operations.

The news of employee cuts comes just hours after Netflix co-CEO Ted Sarandos confirmed new details about the company’s plans to roll out advertiser-backed content to compete with a similar offer from Disney + later this year.

“We’ve left a large customer segment off the table,” Sarandos said in an interview at the advertiser-focused Cannes Lions International Festival of Creativity on Thursday. “We’re adding an ad line. We’re not adding ads to Netflix as you know today. We’re adding an ad range for people who say, ‘Hey, I want low prices and I see ads.’

Competition and economic tide are pushing Netflix to evolve with the market

The new belt-tightening comes amid increased competition from rival streamers who have used infectious lockdowns to develop their business models, as Netflix seeks to slow subscriber decline reported in the first quarter of 2022. In addition to Disney +’s aggressive new ad-supported effort, Apple TV + succeeded in winning the first Best Picture Oscar produced by the streaming service for its movie. Give itDespite the long market cap and Netflix investing billions in its film arm.

Beyond the market competition, like many premium subscription companies, Netflix now faces the additional challenge of record inflation, which forces consumers to re-evaluate how much money they spend on subscription. Adding a low-cost, ad-supported line to Netflix will eventually allow Netflix to regain its subscriber growth trajectory and at the same time add a new revenue stream to its bottom line.

Customers are ready for ads on their streaming TV, as theaters have already proven this

Following the hybrid releases, ad-supported subscription TV is another way streaming services invade the domain of traditional movie theaters. Advertisements shown to audiences in theaters (including pre-movie videos, lobby shows and kiosks) have long been a source of revenue for theater chains.

According to a report by media intelligence agency Magna, infectious lockdowns are expected to return to pre-epidemic levels, mostly in the rearview mirror, reaching about $ 450 million in the US.

Now that streaming subscriptions have become commonplace, the industry shift to ad-supported options is not only a financially good time, but can also boost all revenue boats by tapping the marketing budgets that cinema outlets have long been enjoying.

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