Netflix is cutting back, but not on LA productions

Netflix lost 200,000 subscribers in the first quarter and is expected to lose 2 million more this quarter. How is the entertainment giant still expanding?

 "That 90s Show," filmed at the Sunset Bronson Studios, is one of the many Netflix productions filmed in L.A, on May 17, 2022. Since 2019, Netflix has increased the volume of productions in Los Angeles. Reasons may be an abundance of resources and talent, and actors that like being close to their fa (photo credit: MYUNG J. CHUN/LOS ANGELES TIMES/TNS)
"That 90s Show," filmed at the Sunset Bronson Studios, is one of the many Netflix productions filmed in L.A, on May 17, 2022. Since 2019, Netflix has increased the volume of productions in Los Angeles. Reasons may be an abundance of resources and talent, and actors that like being close to their fa
(photo credit: MYUNG J. CHUN/LOS ANGELES TIMES/TNS)

At the Sunset Bronson Studios in Hollywood on a recent afternoon, teenager Reyn Doi rehearsed lines for the new sitcom "That '90s Show." He was sitting at a table in a meticulously designed set that featured a wallpapered kitchen, shelves filled with teacups and bundt pans hanging from the wall.

His friend's grandparents, Kitty and Red, were interrogating Doi's character, Ozzie, to find out where their granddaughter hung out. What would get him to talk?

"Get me a Capri Sun and I'll tell you anything," he deadpanned, referring to the sugary, fruity pouch packaged drink that was highly popular among kids who grew up in the '90s.

The new series, a spinoff of the Fox sitcom "That '70s Show," is one of more than 70 Netflix productions that will be filmed in the Los Angeles area this year — about the same level of production as before the pandemic.

What's going on at Netflix?

The Netflix logo is seen on their office in Hollywood, Los Angeles, California, US July 16, 2018.  (credit: REUTERS/LUCY NICHOLSON/FILE PHOTO)The Netflix logo is seen on their office in Hollywood, Los Angeles, California, US July 16, 2018. (credit: REUTERS/LUCY NICHOLSON/FILE PHOTO)

Netflix recently laid off 150 workers after reporting its first decline in subscribers in more than a decade. But the cutbacks have not slowed the pace of production activity in Los Angeles, where the Los Gatos company is doubling down and expanding its presence.

"We just think it's really important that we lean into Los Angeles because of the talent base," said Amy Reinhard, vice president of studio operations, in an interview.

Netflix productions filmed in LA include the fourth season of "Never Have I Ever," a show about an Indian American high school student growing up in Sherman Oaks; the limited romance series "From Scratch" with Zoe Saldana; and  the courtroom drama "Lincoln Lawyer," the second most popular show on Netflix last week, which features scenes shot in downtown LA and in front of iconic places like Pink's Hot Dogs. Several Netflix  movies also have been filmed locally, including the science fiction feature "Rebel Moon" directed by Zack Snyder and the thriller "The Gray Man."

To accommodate the growing pipeline of local productions, Netflix has significantly expanded its studio presence in Hollywood since 2016, securing long-term leases for more than 30 soundstages, Reinhard said. Production space has been a big issue in LA, causing some projects to go elsewhere.

Here to stay

In December, Netflix renewed its lease at Raleigh Studios for the next 10 years. In total, the company has more than 800,000 square feet of production space.

That footprint is perfect for what we're trying to achieve and how many productions we have here.

Amy Reinhard, vice president of Netflix studio operations

Netflix has also expanded its live events in the area. Last month, the company held its first large-scale comedy festival, Netflix Is a Joke, with 288 shows in more than 35 LA area venues in 11 days. More than 260,000 tickets were sold.

The company said it produced 13 comedy specials from the festival, with 5,000 people working on the event, including around 200 employees.

"The festival was sort of a signal that, yes, we're still in the middle of this pandemic, but we're able to come back and be vibrant again, which is all very exciting," said Robbie Praw, Netflix's vice president of stand-up and comedy formats, adding that the company is also expanding its comedy presence  in areas such as improv with shows like "Murderville."

"We have a very packed schedule all through the year," he said.

Netflix is expected to spend roughly $18 billion on content this year, up from $17 billion in 2021.

The company has production hubs worldwide, including Toronto, Madrid, Tokyo and London as well Albuquerque, NM, and Brooklyn, NY But LA remains the busiest US film location for the streaming giant. Like other states, California offers film tax credits to lure studios and their crews.

What is Netflix's reach?

"Netflix's investment in original content production in Greater Los Angeles is of real economic benefit to the region," said Philip Sokoloski, spokesman for FilmLA, the nonprofit that handles film permits in the area. "The so-called 'streaming wars' have been most beneficial to major production centers, where the depth of required talent and resources required to welcome new projects is concentrated and strong incentive programs exist to attract interested producers."

Gregg Mettler, showrunner and executive producer of "That '90s Show," says it "goes a long way toward creating an upbeat and positive set" when people can spend time with their loved ones. His production supports 150 families.

"I find my home shower to be a far more creative environment than any hotel shower," Mettler said in a statement. "Big perk of staying local."

Los Angeles is also home to Netflix's largest employee base. The company's local office footprint is larger than streaming rivals such as Amazon Studios or Apple TV+. Netflix employed roughly 11,300 employees worldwide in December, with a little less than half working in LA.

Netflix has nearly 1.6 million square feet of office space in Los Angeles and Burbank compared to Amazon Studios' roughly 915,100 square feet of office and studio space, according to estimates from CoStar Group, which tracks real estate data.

Apple, which also plans to expand its presence locally, had an estimated 500,000 square feet of office space in the Culver City area as of October, according to Raise Commercial Real Estate.

"Just the sheer expansion in the last couple of years has really been exceptional and has outpaced what we've seen from the other streamers," Ryan Patap, CoStar's senior director of market analytics, said of Netflix.

Patap said Netflix's past growth helped fuel more building developers to market their properties to streamers during the pandemic, especially as there was hesitancy about traditional office space during the pandemic. Areas that have benefited from the growth of video streaming include Culver City and Playa Vista.

How is Netflix doing it?

Some industry observers are wondering how long Netflix can keep up its pace, as the company trims costs and lays off workers. Netflix lost 200,000 subscribers in the first quarter and is expected to lose 2 million more this quarter.

At least three people who do business with Netflix and who were not authorized to speak publicly say they feel development has slowed.

"There hasn't been the same rapid pace of activity they have always been known for," said a person who does business with Netflix. "I think there's a bit of a pause happening."

Since April, the company has laid off dozens of contractors in marketing or social media-related jobs as well as 70 part-time workers in animation and 150 employees worldwide.

At a company town hall last week, Netflix chief talent officer Sergio Ezama telegraphed more layoffs in coming months, according to a Netflix employee who declined to be named because they were not authorized to speak on the topic.

To address its subscriber loss, Netflix said it is testing ways to monetize password sharing, increasing its presence in mobile gaming and exploring a lower-cost, ad-supported subscription plan. New content could include potentially live-streaming stand-up comedy specials.