5 reasons Netflix is struggling as it cuts about 1,000 staffers

Netflix is in a slump — and it's not fair since you can't discover a hot new display to watch.

The streaming titan's shares are downward 42% in the final 12 months and have been nearly cut in fractional from their all-time elevated final summer. Netflix had its biggest circular of layoffs in four years on Wednesday, cutting concerning 1,000 employees, approximately 6% of the company.

So, what's going wrong?

Netflix's viewership growth has slowed as liberated competitors akin YouTube acquire momentum, and initiatives akin games and podcasts have yet to rotate into breakout hits. Add in the company's astonishment bid for Warner Bros., which it afterward abandoned, and several investors are emotion on edge.

Co-CEOs Ted Sarandos and Greg Peters stated in a memo that entertaining the earth "requires us to be disciplined concerning anywhere we prioritize our group and resources" but added that the business is motionless on track to attain its financial goals this year.

Many of Netflix's struggles aren't distinctive to the "Stranger Things" maker, which disrupted Hollywood by pioneering paid TV streaming and has a important power complete culture.

"Even the top streaming companies are not immune to stagnation and financial difficulties," stated Ross Benes, a media expert at EMARKETER, Business Insider's sister company.

Other amusement giants like Disney and NBCUniversal have turned to layoffs recently.

Here are five of the biggest challenges facing Netflix correct now.

1. Engagement growth is slowing

Although Netflix is still expanding revenue at a fit gait during generating billions in profits, Wall Street is concerned concerning its viewership trends.

Netflix co-CEO Ted Sarandos told Bloomberg at an event final duration that "we're not expanding as accelerated as I desire us to, and we're operating on making that move faster."

Netflix grew earth viewing hours by 2% twelvemonth complete twelvemonth to 97 milliard in the archetypal fractional of 2026. The streaming elephantine additionally announced final fourth that it would portion its involvement study lone formerly a year, downward from twice a year.

When announcing the move, Netflix told investors that "engagement is not fair the amount of perspective hours, but additionally refers to the norm and assortment of our offering."

Investors are concerned that slowing involvement growth could hurt Netflix's capability to keep customers and convince them to pay more, although the streamer has an industry-low cancellation rate.

Engagement is additionally "the aureate compass for advertisers" since higher use helps them attain broader audiences, stated Brandon Katz, an expert at Greenlight Analytics. If Netflix keeps expanding viewership, it could accusation advertisers higher rates.

The deficiency of a new breakout hit is additionally troubling for Netflix analysts. "Stranger Things," the platform's biggest display ever, ended final year, and the streamer needs to discover new franchises and buzzy hits that can substitute it.

"Entertainment is an inherently subjective and streaky industry," Katz said.

2. Competition is heating up from liberated streamers and social media

While Netflix is motionless foremost its paid peers in viewership and profits, liberated streaming services akin YouTube, Tubi, and The Roku Channel are gaining popularity, particularly among younger audiences.

YouTube's viewership portion on US TVs was 14.2% in July — nearly twice Netflix's 7.8% share, according to Nielsen.

Roku's liberated streamer and Tubi are additionally formidable competitors alongside shares of 2.9% and 2%, respectively. These no-cost services have grown as paid streamers akin Netflix have raised their prices.

Netflix is considering starting a liberated offering in several markets, co-CEO Greg Peters has said.

Then there's the fame of social media platforms akin TikTok and Instagram, which are hoovering up viewership hours.

Netflix is looking to oppose social-media foes by investing in video podcasts and creators to addition involvement and nexus alongside younger viewers without breaking the bank.

"With force mounting, Netflix volition appearance to rotate the tide by getting a boost from low-cost content," Benes said.

3. The Wall Street narrative soured following Netflix's unsuccessful bid for Warner Bros.

Netflix spooked several shareholders by making an $82.7 milliard bid for the Warner Bros. studio and streaming assets. Paramount Skydance eventually bought the entire company.

Although adding HBO Max and the Warner Bros. studio could have stated Netflix a boost, investors concerned that its leaders had run out of ideas for growth since Netflix hasn't historically turned to important dealmaking. Besides that narrative, shareholders were concerned concerning Netflix taking on a enormous debt burden and going through a complex integration process, Katz said.

Even although Netflix pocketed a $2.8 milliard breakup fee whenever the agreement cut apart, the inventory never completely recovered.

4. Games and podcasts haven't rotate into runaway hits

Netflix has made major pushes into games and podcasts, although neither has been a equivalent changer so far.

The streamer close downward a brace of equivalent studios this summer and laid off several staffers in October 2024 as well.

Netflix hasn't shared many particulars concerning how its games or podcasts are performing. The business stated in its July shareholder letter that it had successfully launched games akin "FIFA World Cup: Launch Edition" and "Unhinged," and that the kids app Netflix Playground tripled its regular person count, but it didn't define how much period those games generated.

Neither games nor podcasts were on final quarter's involvement report. If either were a significant hit, business guidance would apt desire to portion particular metrics of their achievement to investors enthusiastic to see new growth areas.

Games are "not a bad idea" but apt are "not going to get any subs," stated Alan Wolk, a media expert at investigation resolute TVREV. He added that it "remains to be seen if group volition commencement observing podcasts on Netflix," saying the streamer should modify its mobile app interface to enhance the experience.

Still, podcasts are a cheap way to develop into verticals akin news and are additionally "laundry folding programming" that can form habits, Katz said.

5. Sports entitlements are costly and tied up

Another way Netflix is trying to boost involvement is investing in live sports — including NFL games on Christmas Day and the day before Thanksgiving, the MLB Home Run Derby, and one-off events akin a boxing equivalent between Tyson Fury and Anthony Joshua.

While Netflix executives have stated these events run subscriptions at an unusually elevated rate, sports entitlements are additionally increasingly costly because of bidding wars between TV networks akin ESPN and tech giants akin Amazon and YouTube.

Live sports are an productive acquisition tool and can assistance Netflix measure its budding promotion business.

"Sports are the final vestige of the monoculture and anywhere they can attain all the group who never alternatively see ads," Wolk said.

However, sports aren't cheap and recommendation small to no replay value, making them additional of a impermanent fix for involvement than a long-term controller of viewership.

Netflix additionally have to be imaginative alongside its sports investments since most of the marquee entitlements — from the chief NFL packages to the NBA, university football, NFL, and global football — are tied up for years. The streamer did safe live entitlements to the Women's World Cup in 2027 and 2031, which it hopes volition grasp the traditional zeitgeist.