Recently, two events happened that illustrate Netflix's mindset in the midst of its budget-squeezing and impending nosedive:
Co-CEO Ted Sarandos' revelation that the company is indeed creating an ad-supported subscription tier, and the streaming giant he company laid off 300 more workers.
Earlier this year, Netflix had already released 150 marketing and social media employees. On top of that — not included in that total — the company had also cut dozens of independent contractors and freelancers, including those in the company's original animation branch. The latest round of layoffs hit numerous U.S. divisions, according to Variety. Worldwide, Netflix has 11,000 employees.
Rumors about a new ad-supported subscription had been circulating for months. Now, Sarandos has officially confirmed that the company will be offering a less expensive tier for consumers who say, "Hey, Netflix is too costly for me and I don't mind advertising." That is likely the reason behind the executive's presence at Cannes Lions — the company does not yet have any advertising partnerships, so Sarandos needs to start building those relationships. The coCEO insists, however, that current paid subscribers will not be seeing advertisements in the future, and that the new plan will not interfere with existing subscription levels, despite steadily rising prices.
All of this harkens back to Netflix's disastrous earnings call earlier this year, when its subscriber numbers dropped for the first time in years. Both the layoffs and the ad-tier appear to be founded on the same premise: Netflix has cornered the market of users who would pay for its services under its current business model, especially in the U.S. and Canada. They must either lower their operations costs or find a way to monetize even the "low-hanging fruit" -- and subsidize it with advertising dollars.