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Despite Netflix closing yesterday’s trading session with a 1.5% gain, the company is facing challenges in the market. Recent reports indicate that Netflix plans to lay off 300 employees across the company, following the layoff of about 150 positions last month. This reduction will affect 3% of the company’s workforce.
These layoffs are a response to the declining stock prices and the ongoing loss of subscribers. Netflix stated that the decision was made to align their operational costs with slower revenue growth.
In April, Netflix had already warned that it would be cutting back on spending to address declining revenues. These latest reports come amid a continued subscriber loss.
In April, for the first time in a decade, Netflix announced that it had lost 200,000 subscribers. This significant loss caused a sharp reaction in the markets, leading to a 35% drop in Netflix shares and wiping out $54 billion in market capitalization in a single day.
While Netflix shares gained 1.5% yesterday and marked their second consecutive day of gains, the company is considering introducing an ad-based subscription model for some users.
According to reports, the ad-based model would not impact current subscribers, but those who opt for lower subscription fees would need to agree to watch ads. If this plan is implemented, it could reduce the projected loss of 2 million subscribers this year.
This move could help the company begin to recover, potentially leading to a rise in its stock price. If successful, Netflix could trade above the $250 price level again. However, worsening market conditions could invalidate this optimistic outlook, leading to continued subscriber losses and further declines in the stock price.