Netflix’s Subscriber Loss Has Destroyed Employee Morale
A record decline in Netflix's share price has shaken employees’ confidence in the company’s long-term trajectory.
www.bloomberg.com
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Bloomberg: Netflix’s Subscriber Loss Has Destroyed Employee Morale
- Thread starter DinkyDev
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www.bloomberg.com
My wife's sister-in-law has worked at Netflix for a few years. I was texting her over the weekend to ask what the vibe around the office was like last week. She said they're mostly still WFH, but that things have been somber and there are a lot of people nervous about losing their jobs.
OP
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I completely understand the sentiment, but it seems to stem from a lack of analysis and misunderstanding of what growth companies are. The thing is that Netflix (and other tech companies that have previously been high growth for years / decades) is on the brink of reaching maturity. A stock price correction in their case isn't really a gigantic sign of trouble. Yes, there are adjustments to make, but focusing on profitability rather than growth is the path forward for them in an environment where growth is more challenging due to increased competition.
Netflix notoriously has an incredibly cutthroat work ethic, so I can see that the employees upholding their end of the gauntlet just to see bad performance would crater their morale.
Eh, pretty much any big tech company that puts a significant portion of of its compensation package together with stock/company shares is facing this right now. I highly doubt subscriber loss is the morale killer - it's after watching your investments do nothing but grow for years and years to suddenly see your balance drastically decline overnight is a huge buzzkill.
Unfortunately, at least in the last couple months, very few big tech companies have been able to avoid it.
Unfortunately, at least in the last couple months, very few big tech companies have been able to avoid it.
Maybe not nothing, but if you had an offer from Netflix and another FAANG within the last year or two, and you picked Netflix, you're probably pretty miffed right now. A huge part of that person's total compensation just tanked 40%
Netflix is unique amongst FAANG in giving employees the option to get their compensation 100% in cash.
I thought they actually gained 500,000 new subscribers, but also dropped Russia, which was a one-time 700,000 subscriber loss. Similar to one-time charges that companies take.
To me, that's not a "the sky is falling" situation. I actually don't understand the stock tanking as hard as it did when they actually added half a million subscribers, indicating that demand is still there (softening or not). But that's the market these day.
www.engadget.com
"The decision to halt service in Russia also helped swing Netflix from growth to a loss. It would have added 500,000 customers, but ultimately lost 700,000 after dropping its Russian base in response to the invasion of Ukraine. Growth was still "soft" across all regions, however."
To me, that's not a "the sky is falling" situation. I actually don't understand the stock tanking as hard as it did when they actually added half a million subscribers, indicating that demand is still there (softening or not). But that's the market these day.
Netflix isn't blaming the pandemic recovery for its lost subscribers
Netflix lost subscribers for the first time in a while, but it's not blaming the pandemic recovery — competition, account sharing and Russia were factors.
www.engadget.com
"The decision to halt service in Russia also helped swing Netflix from growth to a loss. It would have added 500,000 customers, but ultimately lost 700,000 after dropping its Russian base in response to the invasion of Ukraine. Growth was still "soft" across all regions, however."
Employees are given stock options, which is the option to buy the stock at a certain price. The price is generally the stock price when they joined the company, so if the stock is worth less than that now the options are worthless.
Netflix is becoming synonymous with things like price hikes, low quality content, premature cancellations, etc. so the ¨brand¨ is losing value because of that alone
Presumably people were hired with mediocre salaries but had additional stock options as compensation. A stock option allows you to buy a stock at a future date at a price set today. For Example you could buy a stock option to buy Netflix stock at $250 in a year, as long as NetFlix is above $250 in a year you make money according to the difference. The problem is this is much more risky than just buying a stock, if Netflix is at or below $250 you get nothing. So a whole bunch of people probably had their stock options meant to incentivize them to build Netflix's stock price just disappear over the course of a day.
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What Is a Call Option and How to Use It With Example
A call option is a contract that gives the option buyer the right to buy an underlying asset at a specified price within a specific time period.
Many companies have switched to RSUs, which still have value even if the stock tanks.
It does appear that Netflix is still using options though. :-(
Presumably people were hired with mediocre salaries but had additional stock options as compensation. A stock option allows you to buy a stock at a future date at a price set today. For Example you could buy a stock option to buy Netflix stock at $250 in a year, as long as NetFlix is above $250 in a year you make money according to the difference. The problem is this is much more risky than just buying a stock, if Netflix is at or below $250 you get nothing. So a whole bunch of people probably had their stock options meant to incentivize them to build Netflix's stock price just disappear over the course of a day.
What Is a Call Option and How to Use It With Example
A call option is a contract that gives the option buyer the right to buy an underlying asset at a specified price within a specific time period.www.investopedia.com
But there are other options usually?
I hate to seem insensitive, but an eric andre "why would X do this?" meme is perfect for this scenario. People keep their Netflix accounts for the (good) content that's only on Netflix. Netflix keeps cancelling those shows. We've been collectively telling them for years now why we're leaving but they prefer to instead cancel those things and spend money on tons of low-budget schlock and copy-cat shows/movies.
90% of my Netflix activity over the last 2 years has been:
-Adding shows that look interesting to my watch list
-Watching a few episodes and realizing they are in fact garbage, and removing them from my list
-Getting notifications that said garbage is getting new seasons
-Accidentally adding back garbage to my list because they changed the thumbnails, and they are all so samey it's hard to remember
Edit: The remaining 10% obviously being watching quality content, like Russian Doll.
90% of my Netflix activity over the last 2 years has been:
-Adding shows that look interesting to my watch list
-Watching a few episodes and realizing they are in fact garbage, and removing them from my list
-Getting notifications that said garbage is getting new seasons
-Accidentally adding back garbage to my list because they changed the thumbnails, and they are all so samey it's hard to remember
Edit: The remaining 10% obviously being watching quality content, like Russian Doll.
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I really liked when Netflix was like a bridge for series and movies from other countries that would be difficult to watch otherwise. Trapped, just to name one. Maybe do "cheap" stuff as well that you won't cancel in a month, Netflix?
They definitely have to cut spending like they're doing right now instead of paying 500 billion dollars to Ryan Reynolds, Adam Sandler and The Rock for generic lame movies.
They definitely have to cut spending like they're doing right now instead of paying 500 billion dollars to Ryan Reynolds, Adam Sandler and The Rock for generic lame movies.
🪦Presumably people were hired with mediocre salaries but had additional stock options as compensation. A stock option allows you to buy a stock at a future date at a price set today. For Example you could buy a stock option to buy Netflix stock at $250 in a year, as long as NetFlix is above $250 in a year you make money according to the difference. The problem is this is much more risky than just buying a stock, if Netflix is at or below $250 you get nothing. So a whole bunch of people probably had their stock options meant to incentivize them to build Netflix's stock price just disappear over the course of a day.
What Is a Call Option and How to Use It With Example
A call option is a contract that gives the option buyer the right to buy an underlying asset at a specified price within a specific time period.
There's usually a vesting period. Meaning you can't cash in your stock options for a period of time until after you work for the company. Even worse it can get spread over a long period of time such as 25% per year over 4 years or 20% per year over 5 years or various other splits depending on the level of the employee and the company. I have no idea how Netflix does it.
For employees that joined at the height of the stock price, they're possibly underwater with stock options that aren't even vested. For those that have options that are already vested, if you buy your stocks at the strike price of the option that is above the market value, you'd have to think that they're going to be worth more than what you paid for them at some point in the future. If you're pessimistic on that outcome already, I don't know why you'd bother.
Edit: Clicked post too early but I was also going to say that I have no idea if Netflix offers the cashless options.
Roughly 6 months ago 1 share of $NFLX would be around $700, today it's around $215.
If you got stock options at a value higher than they are worth now (which made perfect sense as Netflix was going up and was looking to keep soaring), you've actively lost money because 1000 shares 6 months ago was ~3x as valuable as 1000 shares today.
Options or ESPP are tied to a price at a certain date plus maybe a discount, so if the price of the stock is lower than that then it's basically worthless.
What's more concerning is if the people who work there don't see a way for the stock to go back up to previous levels. Because if you work there and believe that this is a momentary dip, then you maybe ride it out (and get a bunch of stock in your next ESPP purchase for dirt cheap). But if you bail now you're basically not expecting them to even reach your option price again.
Presumably people were hired with mediocre salaries but had additional stock options as compensation. A stock option allows you to buy a stock at a future date at a price set today. For Example you could buy a stock option to buy Netflix stock at $250 in a year, as long as NetFlix is above $250 in a year you make money according to the difference. The problem is this is much more risky than just buying a stock, if Netflix is at or below $250 you get nothing. So a whole bunch of people probably had their stock options meant to incentivize them to build Netflix's stock price just disappear over the course of a day.
What Is a Call Option and How to Use It With Example
A call option is a contract that gives the option buyer the right to buy an underlying asset at a specified price within a specific time period.
That's not how options work when given to employees as compensation.
Isn't this sort of thing exactly why Netflix cancels stuff though? Even if I personally enjoy something, if enough people do the "watch a few episodes, then drop" thing, they'll cancel it once they don't see the value in something that doesn't retain viewers.
ESPP is sold to you at a discount. Usually you can commit 5 to 10% of your salary every 6 months to purchasing stock at an up to 15% discount. You get to buy the stock at the price either at the beginning or end of the 6 month period at a 15% discount (whichever is lower).
ESPP shares are not worthless if they drop below the price you purchased them at, but if you decide to sell them at that price, you would have a loss.
Options are worthless if the price drops below the option price.
I thought they actually gained 500,000 new subscribers, but also dropped Russia, which was a one-time 700,000 subscriber loss. Similar to one-time charges that companies take.
To me, that's not a "the sky is falling" situation. I actually don't understand the stock tanking as hard as it did when they actually added half a million subscribers, indicating that demand is still there (softening or not). But that's the market these day.
Netflix isn't blaming the pandemic recovery for its lost subscribers
Netflix lost subscribers for the first time in a while, but it's not blaming the pandemic recovery — competition, account sharing and Russia were factors.
"The decision to halt service in Russia also helped swing Netflix from growth to a loss. It would have added 500,000 customers, but ultimately lost 700,000 after dropping its Russian base in response to the invasion of Ukraine. Growth was still "soft" across all regions, however."
Even if you remove Russia, they missed by their target by a lot, and called out that they expect the losses to be worse in the future. 2 million more accounts, I believe.
I know someone who was an engineer at Netflix who got the fuck out as soon as he was fully vested. It wasn't anything specific, but just the overwork that is fairly common. He got a job at a company with a closer office and more reasonable hours that made it easier to be with his family. Without that stock motivation, he would have left earlier and been even more miserable. Now, it's a different world right now with WFH, but still I can see why morale is taking a hit if people are there to get in and out with their money and not thinking about sticking around at the company for other reasons, or fearing it'll result in layoffs.
The price creep and lack of ongoing investment in series is really frustrating as a consumer. $20 seems like the ceiling that they can reasonably ask for, but we'll see. They still have the most amount of content that I want to watch at any given time, but it does seem like over the last few years all decisions are about quantity over quality. They only seem to care about binge numbers and throw out a dozen new things every week to see what sticks. I don't really consume content that way so it feels like my habits don't count so they aren't necessarily going to make the stuff that people like me watch, even though I'm here with my $20 every month just like everyone else.
The price creep and lack of ongoing investment in series is really frustrating as a consumer. $20 seems like the ceiling that they can reasonably ask for, but we'll see. They still have the most amount of content that I want to watch at any given time, but it does seem like over the last few years all decisions are about quantity over quality. They only seem to care about binge numbers and throw out a dozen new things every week to see what sticks. I don't really consume content that way so it feels like my habits don't count so they aren't necessarily going to make the stuff that people like me watch, even though I'm here with my $20 every month just like everyone else.
Netflix is renowned for its incredibly cutthroat, ruthless employee culture, with the 'Keeper test' a core and defining part of their employee culture.
It's unsurprising to me that employees would not look favourably upon the the dip in share price (which is what the article entirely focuses on; the subscriber number is really only focused on in the title to grab clicks).
It's unsurprising to me that employees would not look favourably upon the the dip in share price (which is what the article entirely focuses on; the subscriber number is really only focused on in the title to grab clicks).
I was surprised to hear that Netflix gives out options instead of RSUs. This article has a little more detail, and also goes on to mention the allocation of options vs cash for the executive team:
So I can see why people are pissed. If you had taken a bunch of your comp as stock when it was up at 650, you would need it to hit 910 to be better off than receiving cash by that metric. Since it's now down around 200, you're likely not going to see any value out of that for a while, if ever.
At the same time, I don't have a ton of sympathy for the employees. Stocks go up and down, high reward means high risk. The whole point of receiving stock is to align your long term interests with the company. Their base salary is still probably pretty high. This was always a possible outcome, even if it didn't seem likely a year ago.
So I can see why people are pissed. If you had taken a bunch of your comp as stock when it was up at 650, you would need it to hit 910 to be better off than receiving cash by that metric. Since it's now down around 200, you're likely not going to see any value out of that for a while, if ever.
At the same time, I don't have a ton of sympathy for the employees. Stocks go up and down, high reward means high risk. The whole point of receiving stock is to align your long term interests with the company. Their base salary is still probably pretty high. This was always a possible outcome, even if it didn't seem likely a year ago.
Boohoo. Tell your employer how stupid it is to force me to pay for the twenty dollar "family" plan just to watch stuff in 4k. I hope they keep bleeding users.
It would be so simple to get your rate using sliders. One for quality, one for amount of users. Bam there's your custom price
Thankfully there's a solid chance the F is also going drop out sooner or later.
will see a lot of people quit, especially next quarter when I expect sub numbers to be FAR WORSE as all this media attention has a ton of people going "why am i paying for netflix? i may as well cancel too"
however that does mean sometime in the next 6-8 months it'd probably be a good time to join as an employee. they will be desperate for workers and likely give out good option packages that will likely be very lucrative in 4-5 years if the company can turn around. A huge IF of course, historically most companies don't recover from repeated failure.
however that does mean sometime in the next 6-8 months it'd probably be a good time to join as an employee. they will be desperate for workers and likely give out good option packages that will likely be very lucrative in 4-5 years if the company can turn around. A huge IF of course, historically most companies don't recover from repeated failure.
RSU grants have vesting schedules. Affects your TC. By all accounts though, Netflix's base pay can go really high.
Don't worry the F is an M now so FAANG without Netflix just spells MAGA. Oh no actually that's just as bad
Constant price hikes to nearly 20$ for HD here in quebec.... Yeah I'm seriously thinking of quitting for a few months.
This. Everyone there knows that the best way to raise your stock is to announce "cost cutting measures" which translates into mass layoffs.
It's probably more with how the company is taking this as a sign to restructure, essentially putting everyone's jobs at risk.
While I'm sure the employees would rather their company be in a good stock position than bad, I can almost guarantee they are more worried about how the CEO and board are reacting by laying off whole departments with no warning.
While I'm sure the employees would rather their company be in a good stock position than bad, I can almost guarantee they are more worried about how the CEO and board are reacting by laying off whole departments with no warning.
Its truly ridiculous how one bad performing year for a company that has been on the climb for over a decade and completely upended an industry can send everything into chaos. Capitalism is fucking stupid.