https://www.hollywoodreporter.com/business/digital/netflixs-big-wake-up-call-the-power-clash-behind-the-crash-1235136004/ * [p] x Skip to main content Plus Icon Click to expand the Mega Menu Click to expand search form Got a tip? The Hollywood Reporter homepage Newsletters Subscribe [] The Definitive Voice of Entertainment News Subscribe for full access to The Hollywood Reporter See My Options Sign Up site categories * News * Film * TV * Awards * Lifestyle * Business * International * Video * Podcasts Plus Icon Click to expand the Mega Menu Menu Click to expand search form The Hollywood Reporter homepage Read Next: Box Office: 'Doctor Strange 2' Scores Heroic $27M Opening Day Overseas Subscribe [] The Definitive Voice of Entertainment News Subscribe for full access to The Hollywood Reporter See My Options Sign Up * Home * Business * Digital Netflix's Big Wake-Up Call: The Power Clash Behind the Crash As rivals toggle between schadenfreude and fear, top creators and insiders are increasingly becoming vocal about what's gone wrong with the streaming giant's culture. By Kim Masters Plus Icon Kim Masters Editor-at-Large More Stories by Kim * MGM Shake-Up: Michael De Luca, Pam Abdy Exiting as Amazon Era Begins (Exclusive) * Netflix's Big Wake-Up Call: The Power Clash Behind the Crash * Netflix Backs Away From Will Smith Film 'Fast and Loose' (Exclusive) View All April 27, 2022 6:55am * Share this article on Facebook * Share this article on Twitter * Share this article on Email * Show additional share options * Share this article on Print * Share this article on Comment * Share this article on Whatsapp * Share this article on Linkedin * Share this article on Reddit * Share this article on Pinit * Share this article on Tumblr illustration of Ted Sarandos canoeing down Illustration by Laemeur * Share this article on Facebook * Share this article on Twitter * Share this article on Email * Show additional share options * Share this article on Print * Share this article on Comment * Share this article on Whatsapp * Share this article on Linkedin * Share this article on Reddit * Share this article on Pinit * Share this article on Tumblr Before we get to the deep dive on the internal drama at Netflix -- the internecine battles among top leadership that more than one source calls "the Hunger Games" -- let's pause to let the town enjoy this moment. The thing about schadenfreude is that the freude (joy) is usually savored when the schaden (the bad thing) happens to someone else. In the case of Netflix's ongoing debacle, however, the streamer's competitors acknowledge that they are damaged themselves by the sudden discovery that maybe the sky is not the limit when it comes to streaming. But they are relishing the bad news anyway. Yes, says a top executive at one of Netflix's legacy-studio rivals, the news has dinged valuations and been bad for his business, but "it sure fucking feels good." This executive rattles off a brief history of Netflix in Hollywood, including the A-word that arises in almost every conversation about the streamer. "The entire town's rooting against them," he says. "It's not just the arrogance of announcing that you're the leaders, not respecting executive contracts and [poaching] everybody and the way they carry themselves. There was a feeling of anger and then despair -- are our businesses over?" Related Stories Frank Langella TV Frank Langella Responds to Firing From Netflix's 'The Fall of the House of Usher': "I Have Been Canceled" Florian Munteanu TV Florian Munteanu Joins Season 3 of Netflix's Historical Drama 'Vikings: Valhalla' Now those studios get to feel a little sexy again, as Warner Bros. Discovery CEO David Zaslav made clear in an April 26 earnings call when he noted that he heads "a far more balanced and competitive company." Says a key executive at a big media company: "Cable networks may be on the decline, but they still generate a lot of revenue. ... Maybe try keeping the lights on. Maybe don't kill theatrical so fast." While Netflix's competitors still have room to grow -- and Disney in particular has committed to growing a lot -- agents and creators believe they are seeing the end of the spending spree that has lined many pockets in recent years. Asked if the content bubble has burst, Grace and Frankie creator Marta Kauffman -- a unicorn who got to a Guinness book-worthy 94 episodes of a scripted show on Netflix -- says, "Yes." (I interviewed her for an upcoming episode of my KCRW show The Business.) A top executive at a legacy company that's poured resources into streaming suggests that may be so. "We'd all be insane not to give the spend a hard look," he says, adding, "Agents are flipped out more than anybody. They're taking it hard." Still, whether Netflix's rough ride is truly a measure of the limits on subscriber growth is not clear, whatever Wall Street thinks. At a time of war in Europe and rising inflation, it may be a little soon to write an obituary. Netflix has gotten itself out of tight spots before. bar chart showing Netflix subscribers over time And now, back to the drama. Several important Netflix creators voice a very consistent theory about what's gone wrong with the streamer's culture. They see a link between Netflix's problems and the 2020 fall of Cindy Holland, who played a key role in launching the service's originals -- brilliantly and often expensively -- with House of Cards, Orange Is the New Black and Stranger Things, among others. These sources say Holland was the one who nurtured strong relationships with talent and took time to offer thoughtful development notes while still making people feel safe and supported in pursuing their passion projects. Important multihyphenates who work or have worked with Netflix say it was Holland rather than Ted Sarandos, then chief content officer, who gave Netflix its profile as a home to buzzy, quality shows. (It was also Holland who warned Sarandos, to no avail, that continuing to order specials from one of his comedy heroes, Dave Chappelle, would lead to internal strife and bad press.) "That service was built on the back of Cindy Holland's taste," says one. "I could give you a list of names of people who would lie down on railroad tracks for her. Ted is a fan [of content], not a picker. He's a cheerleader and a good cheerleader, to a degree." According to a former insider, Netflix knew years ago that it would have to increase its volume of original shows substantially year-over-year to compete. The service could foresee the time when popular shows on the service, like Friends and The Office, would be reclaimed by the studios that made them as they launched their own streaming services. And for a time, as Netflix ratcheted up its originals, it seemed like an unstoppable force, growing its subscriber base even as some questioned the underlying economics of its business. But a former insider says Sarandos' volume strategy began to prove destructive to the culture and the quality of the service's offerings. "Ted is great at managing growth, but the company hit a phase where they needed to manage differently," this person says. Whether Holland's spendy approach itself would have proved sustainable is a question, but several creators believe Netflix lost much of its early cachet by over-rotating to less expensive, less curated and less compelling -- or, the company might say, broader -- fare that simultaneously overwhelmed and underwhelmed some subscribers. The 2016 arrival of former CBS and Universal Television executive Bela Bajaria as head of unscripted and international content represented a huge turning point, according to multiple sources. By then, Holland was to oversee 80 shows on the service while Bajaria was responsible for 60. "Who can make 140 shows a year?" asks one creative. "That's insane. That's when the culture of fear took over." Holland declined to comment. The demand for ever more volume did not abate. Bajaria, who also had responsibility for licensing TV and film content from major U.S. studios, quickly moved into Holland's scripted television domain. In 2017, she gave a 13-episode order to Insatiable, a dark, hourlong comedy pilot that had been rejected by The CW. Holland's team had passed on it. One prominent Netflix supplier calls Bajaria's decision "the beginning of the Walmart-ization" of the streamer. (The series also attracted negative press for fat-shaming, among other sins.) "It's called Insatiable-gate within the halls of Netflix," this source says. "It gave the power of greenlight to several people. It caused absolute demoralization and chaos. Everybody thought it was a terrible thing Ted did, allowing one team to greenlight something that another team had passed on." Though the show was critically panned (it sits at 11 percent on Rotten Tomatoes), it performed well enough to get a second season. "It sent a message to Ted because it did OK numbers," this source continues. "Ted, wanting to increase content by a huge amount, started to look to Bela as what the company should be. Cindy kept saying we should still be betting on high-end creators and making some cheaper things, too." (A Netflix insider notes that Sarandos was impressed when Bajaria picked up the thriller You from Lifetime -- a project that Holland had rejected as a pitch. The series turned into a Netflix hit.) A Netflix rep stated in reply to a request for comment, "Bela is an exceptional creative executive with an eye for quality as well as shows that will appeal to many different audiences. Under her leadership we've expanded the variety and breadth of our TV programming in the U.S. and internationally." Among the shows Bajaria is credited for are megahit Squid Game and Lupin. Sources say some Netflix executives began to worry about the burgeoning number of shows. "It was, 'Hey, guys, do we think this is enough? Because we are cannibalizing our own shit,'" says a former insider. And then there was Holland's concern about the lack of curation and quality control. An important creative talent who had successes working with Holland muses: "I wonder if, say, a bonobo throwing shit at a whiteboard full of titles as a method of deciding what projects to make would have more or less success than all of these other 'deciders' who think they know what people want or don't want." But a prominent creative who was squarely on Team Holland says, "They pitted Bela and Cindy against each other." Adds a former Netflix insider, "People would always say they didn't know who to go to [to pitch]. And Ted loved that stupid phrase, 'There are multiple paths to yes.'" One of Holland's last projects for Netflix was The Queen's Gambit, an expensive period piece that sources say was mocked as "Holland's Folly" by some in-house. According to sources, Bajaria and her staff were dismissive and even unpleasant to the team that worked on it. (A Netflix spokesperson says that is false.) When the series turned into a phenomenon, Bajaria was routinely credited for it in the media. As Holland expressed unhappiness with the broader strategy, an insider says the response was that things would work out fine if maybe one in 10 shows worked. "This is one of the things that Cindy and Ted disagreed on for a while," this person says. "She was the one person who would push back on him." Frustrated, sources say Holland turned to Netflix founder Reed Hastings. This source says Holland also objected to Sarandos' expensive campaigns for the Oscars: "Cindy said, 'You're losing the town. You cannot buy your way to an Oscar.' That was another thing Ted was mad about." In July 2020, Sarandos was promoted to co-CEO of Netflix. With that, some believe, he was no longer interested in dealing with pushback from Holland or anyone else. In September 2020, in the middle of the pandemic, Sarandos invited Holland to a meal at Pastis in New York -- outdoors, naturally -- and told her that he was backing Bajaria. A source believes Sarandos, who is said to dislike confrontation, chose a public spot to avoid it. "He didn't bring her into his office and say, 'We've been together for years,'" says one Holland loyalist. "And she was the soul of the operation." But another source says Sarandos flew to New York specifically because he didn't want to have the conversation over Zoom. Sarandos is then said to have given both Bajaria and Netflix film chief Scott Stuber staggering raises. While Netflix executives are famously well-paid, Holland had been making less than $10 million a year; Stuber and Bajaria were rewarded with salaries from $16 million to $18 million. With that kind of compensation at stake and Netflix's notoriously fickle anyone-can-get-fired-at-any-time credo, it was no surprise that both would do their best to carry out Sarandos' vision, says a source who has worked closely with the service. While Holland had been criticized for spending too freely, Bajaria has established a reputation for grinding down budgets. Multiple sources say that has already been going on for at least a year at Netflix, and it is clearly intensifying. But while Bajaria has her detractors, one unhappy Netflix creative says he doesn't blame her or, by implication, Stuber, for the consequences. "You cannot blame Bela for any of this," this person says. "She has bosses in Reed and Ted, and this fish stinks from the head. Now they make widgets. And she's on the road so much, she can't foster relationships with people." Another major Netflix talent agrees that a "profound culture shift began with Cindy's departure" but adds a major caveat. "Netflix was a gut-driven, risktaking, maverick culture," he says. "Now it's more prudent and frequently indecisive. But what's also true is that the Cindy era had no cost controls. It was therefore unsustainable as a business model. That's a fact." The rumor mill is now spinning furiously about what Netflix will do to address its issues. Which heads will roll? Is it possible Hastings will sell? Will the streamer drop its binge strategy? Can its ad-supported option work? What about games? Despite the questions, the chief of a rival company says the streamer is still a behemoth. "I don't think Netflix is Blockbuster," he says. "I think it's here to stay. But the idea that they could spend their way to world domination is over." A version of this story first appeared in the April 27 issue of The Hollywood Reporter magazine. Click here to subscribe. Read More About: * Business Features * Netflix THR Newsletters Sign up for THR news straight to your inbox every day Subscribe Sign Up More from The Hollywood Reporter * Ticketmaster Live Nation Revenue Soars As Concert Ticket Sales Recover [] * Peter Chernin Chernin Group, Bob Iger and Rich Paul Invest $263M in Toymaker Funko [] * iHeartMedia iHeartMedia Grows Podcast Revenue to $69M, But Discloses Quarterly Loss [] * Video Games Imax Inks Deal to Show Summer Game Fest, Game Awards in Theaters [] * Waitress Actors' Equity Expands 'Waitress' Unionizing Fight to Entire Broadway Touring Industry (Exclusive) [] * WME Guy Ritchie Signs With WME [] Shopping With THR Kross Studio Star Wars Boba Fett Tourbillon Watch Collector Set The Best Gifts for 'Star Wars' Superfans to Shop on Sale for May 4th By Danielle Directo-Meston Star Wars: A New Hope x Stoney Clover Lane Collection 'Star Wars' and Stoney Clover Lane's Collab Is Ready for Your Next Galactic Starcruiser Adventure By Danielle Directo-Meston Frasier Sterling Necklace, Van Cleef Arpels Zodiac Medal The Best Zodiac Jewelry for Wearing Your Sign In Style Like a Star By Marie Lodi 'Stranger Things' x JanSport Collection 'Stranger Things 4' and JanSport Team on Upside Down-Ready Backpacks and More By Danielle Directo-Meston THR Newsletters Sign up for THR news straight to your inbox every day Email Address [ ] Subscribe Today Sign Up By subscribing, I agree to the Terms of Use and Privacy Policy Most Popular Rose Rock and Chris Rock Chris Rock's Mom Calls Out Will Smith's Oscars Ban: "You Don't Even Go Every Year" By Ryan Gajewski illustration of Ted Sarandos canoeing down a waterfall Netflix's Big Wake-Up Call: The Power Clash Behind the Crash By Kim Masters Dave Chappelle Dave Chappelle Attacked Onstage at the Hollywood Bowl By Abid Rahman THAT '70s SHOW, Danny Masterson, Mila Kunis, Laura Prepon, Ashton Kutcher, Topher Grace, Wilmer Valderrama, 'Time Is On My Side', (Season 7), 1998-2006 'That '70s Show' Original Stars Close Deal to Return for Netflix Sequel By Lesley Goldberg Naomi Judd Naomi Judd, of Grammy-Winning Duo The Judds, Dies at 76 By Associated Press, THR staff Must Reads F9: THE FAST SAGA, (aka F9, aka FAST & FURIOUS 9, aka FAST AND FURIOUS 9), director Justin Lin, on set, 2021. Behind Justin Lin's 'Fast 10' Breaking Point By Borys Kit illustration of Ted Sarandos canoeing down a waterfall Netflix's Big Wake-Up Call: The Power Clash Behind the Crash By Kim Masters Michelle Pfeiffer on the effort (and angst) that goes into being one of the most effortlessly cool stars of our time Michelle Pfeiffer Is Definitely Done Second-Guessing Herself (Probably!) By Lacey Rose THR cover 13 low res The Definitive Voice of Entertainment News Subscribe for full access to The Hollywood Reporter SEE MY OPTIONS Sign Up PMC Logo Most Popular These Photos of Jennifer Garner Hanging With Jennifer Lopez's Daughter are Blended Family Perfection After Buying in Pasadena, 'Big Bang Theory' Star Simon Helberg Lists in Los Feliz Tiger Preps for PGA Championship as Mickelson LIV Deal Takes Shape Danish Artist Allegedly Vandalizes Iconic Asger Jorn Painting in Act Some See as Right-Wing Protest You may also like [lazyload-f] Ditch Your Slides and Say Hello to Huarache Sandals This Summer for an Instant Style Upgrade 6 hours ago [lazyload-f] Asking $170 Million, This Miami Beach Compound Could Set a Florida Record 6 hours ago [lazyload-f] New Book Reveals Diddy's Role In Dr. Dre Losing $200 Million In Apple-Beats By Dre Deal 3 hours ago [lazyload-f] Future & Drake Are Kings of a Medieval Fairytale in Storybook 'Wait For U' Video: Watch 6 hours ago THR cover 13 low res Subscriber Support * Get the Magazine * Customer Service * Back Issues * E-edition Access The Hollywood Reporter * About Us * Advertise * Careers * Contact Us * Accessibility Legal * Terms of Use * Privacy Policy * California Privacy Rights * Privacy Preferences * AdChoices * Do Not Sell My Personal Information Follow Us * Icon Link Plus Icon facebook * Icon Link Plus Icon twitter * Icon Link Plus Icon instagram * Icon Link Plus Icon youtube Newsletter Sign Up Sign Up [ ] Subscribe Sign Up Have a Tip? Send us a tip using our anonymous form. Send Us a Tip Sign Up Icon Link Plus Icon The Hollywood Reporter is a part of Penske Media Corporation. (c) 2022 The Hollywood Reporter, LLC. All Rights Reserved. THE HOLLYWOOD REPORTER is a registered trademark of The Hollywood Reporter, LLC. Powered by WordPress.com VIP Our Sites * Artnews * BGR * Billboard * Deadline * Fairchild Media * Footwear News * Gold Derby * IndieWire * Robb Report * Rolling Stone * SheKnows * She Media * Soaps * Sourcing Journal * Sportico * Spy * StyleCaster * The Hollywood Reporter * TVLine * Variety * Vibe * WWD Close the menu The Hollywood Reporter homepage * News Expand news menu + Latest News + Culture & Politics + Tech & Digital + Music + LA/Local + THR Investigates + Obituaries * Film Expand film menu + News + Features + Reviews + Box Office + Heat Vision * TV Expand tv menu + News + Features + Reviews + Ratings + Live Feed + Heat Vision + The Fien Print + TV's Top 5 Podcast * Awards Expand awards menu + News + Awards Chatter Podcast + Feinberg Forecast + Behind The Screen + The Race + THR Presents * Lifestyle Expand lifestyle menu + News + Style + Shopping + Arts + Real Estate + Rambling Reporter * Business Expand business menu + News + Features & Columns + Representation + THR, Esq * More Essentials Expand more-essentials menu + International News + Video + Podcasts + Featured Voices Follow Us * Follow thr on facebook * Follow thr on twitter * Follow thr on instagram * Follow thr on youtube Alerts & Newsletters Your Email [ ] Subscribe Sign Up optional screen reader * About Us * Advertise * Careers * Contact Us Icon Link Plus Icon The Hollywood Reporter is a part of Penske Media Corporation. (c) 2022 The Hollywood Reporter, LLC. All Rights Reserved. THE HOLLYWOOD REPORTER is a registered trademark of The Hollywood Reporter, LLC. ad Quantcast