A lot of people seem to work for Netflix these days.
The company remains, by far, the most watched paid streaming service in the world, with more than 325 million subscribers. It accounts for far more TV viewing time than any of its traditional entertainment competitors, including Disney, Amazon Prime Video or Skydance. Its revenues are robust and its profits abundant.
Yet on Wednesday, Netflix laid off about 1,000 employees, or about 6% of its workforce, in its largest round of job cuts in four years. And on Thursday, the company made an abrupt change in leadership, eliminating Bela Bajaria, who oversaw all of the company’s TV series, movies, live events, sports and video podcasts, and replacing her with Peter Rice, a Fox and Disney veteran.
Two closely related factors contributed to the decision, which reverberated throughout Hollywood this week. The company isn’t growing fast enough, as Ted Sarandos, the company’s co-chief executive, recently said. And Netflix’s stock price has fallen more than 40% over the last year.
“These are steps Netflix needs to take,” said Mike Proulx, vice president and director of research at Forrester, a research and consulting firm. “The company needs to act more boldly, especially given what is currently happening with its competitors.”
Netflix has seen viewer time stagnate as it struggles to find new global hits to replace hit series like “Stranger Things,” which ended last year. YouTube, one of Netflix’s main competitors, has seen its share of U.S. TV viewing time increase over the past year, while Netflix’s share has declined, according to Nielsen.
In September, the streaming service had its worst performance at the Emmys in a decade, even though it spent more than three times as much on content as it did in 2016.
And some of the biggest names that Netflix had lured with lucrative production deals were left to competitors. The Duffer brothers, creators of “Stranger Things,” decamped to Paramount last year. “Stranger Things” executive producer Shawn Levy announced his departure for Disney last month. Director David Fincher, who brought “House of Cards” to Netflix and will release his latest film, “The Further Mis-Adventures of Cliff Booth,” on the service in late December, opted to pass on a deal with the company, and Noah Baumbach (“Marriage Story,” “Jay Kelly”) left for Warner Bros.
“The stock is down for a reason: It feels like their engagement challenges are going to create headwinds for revenue growth,” said Rich Greenfield, founder of LightShed Partners, a research firm.
“The only way Netflix can improve its stock,” he added, “is to prove that slowing engagement is not impacting revenue growth.”
Netflix’s stock price began to fall last year when it made a bold bid for Warner Bros.’ studio and streaming businesses. Discovery. The potential acquisition, which Netflix was willing to spend more than $80 billion on, seemed to undermine the central premise that Netflix was doing very well at producing hit movies and shows and should instead look outside the company for help. “We have been builders, not buyers,” Mr. Sarandos said for years.
But when Mr. Sarandos announced the deal, he said that Warner Bros.’ well-oiled studios. would be an essential asset for the company. “Our deep development basin is quite shallow,” he said at the time.
Netflix ultimately lost this award to Paramount Skydance. At a Bloomberg conference last month, Mr. Sarandos acknowledged that “the deal itself had sort of disrupted the commercial narrative of investors.”
But he said he did not regret the pursuit. “You have to be willing to put the business narrative at risk for something that is good for the business in the long run,” he added.
Even after Netflix dropped its offer, the stock price continued to decline.
Concerning the audiences, they played a role. Netflix recently changed its own metrics from number of subscribers to the amount of time each user spends on its shows. It’s one of the few streamers reporting data this way, and observers have observed shows and movies generating lower numbers than before.
Popular TV series like “Beef,” “The Night Agent” and “Avatar: The Last Airbender” saw significant declines in viewership in their most recent seasons, according to Netflix statistics. And no movie released this summer has become a smash hit, compared to last summer, when “KPop Demon Hunters” and “Happy Gilmore 2” dominated the culture and were big hits on the service.
Their statistics highlighted how Netflix was struggling to maintain its successes or find new ones. “In many ways, this is a self-inflicted wound,” Mr. Greenfield said, observing that no other streamer reports this type of data.
Measures taken by third parties have not been much more lenient. Netflix accounted for 7.8% of all U.S. TV viewing time in July, according to Nielsen, down one percentage point from last year. YouTube’s share is over 14%, while the streaming services of Disney (4.7%), Prime Video (4.2%) and everyone else are far behind.
Mr. Sarandos acknowledged in a memo to employees Thursday that he viewed the company’s leadership change as “an opportunity to take our roster to the next level,” particularly in the United States.
He did not inform the well-liked Ms. Bajaria of her firing until late Wednesday, hours after the company announced the job cuts, according to two people briefed on the discussion. Ms. Bajaria, who joined the company in 2016 and succeeded Mr. Sarandos as chief content officer in 2023, favored big-tent shows and movies, a quality she once likened to a “gourmet cheeseburger” — content that was “premium and commercial at the same time,” she told the New Yorker.
But between a poor showing at the Emmys — Netflix won just 16 this year, its lowest total since 2016, and well below Apple TV and HBO Max — and difficulty finding a commercial blockbuster, the company was struggling on both fronts.
Netflix has also pivoted in many different directions over the past few months. He’s signed on to dozens of video podcasts and made deals with YouTube creators like Sean Evans.
“They recognized that they needed to get into the designer business and they are actively pursuing it,” Mr. Greenfield said. “I think the best proof that it works is that others follow.”
Netflix has considered becoming more of a streaming destination and has absorbed a local broadcaster on the service in France. It has had discussions with Fox and NBCUniversal about striking deals to also add Fox One and Peacock content.
Netflix is now bringing on Mr. Rice, a seasoned executive with three decades of experience in film and television. He was a producer. He ran a film studio (Fox Searchlight). He headed a large television division (at the Walt Disney Company). His tenure at Fox included producing independent hits such as “Little Miss Sunshine,” “Juno” and “Slumdog Millionaire,” which won the 2009 Best Picture Oscar.
Those who have worked for him describe him as someone who both knows how to operate within a large operation and who can talk to complicated directors in ways that can improve their work. When Mr. Rice was fired at Disney, director Danny Boyle, who worked with Mr. Rice on “Slumdog Millionaire,” hailed him as “the best executive I’ve ever worked with.”
“I always thought he was destined to run a big company,” said Joe Pichirallo, a professor at New York University’s Tisch School of the Arts and a former Fox Searchlight executive, who describes Mr. Rice’s tastes as both elevated and approachable. He added: “A cheeseburger would not meet my definition of Peter Rice. »
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