Too Many Cheeseburgers, No Steak: Peter Rice’s Netflix Challenge

Call it Netflix 3.0.

Netflix has 325 million subscribers, a $20 billion annual programming budget and one of the most powerful distribution platforms in entertainment. So why does it suddenly need a creative overhaul?

That’s the question awaiting Peter Rice when he arrives Monday to take over as the streamer’s new chief content officer, replacing Bela Bajaria after a whiplash-inducing round of executive departures and layoffs. His assignment: Turn Netflix’s diet of Bajaria’s so-called “gourmet cheeseburgers” into something closer to perfectly cooked steaks. Without losing the millions of viewers who still love the burgers.

“Ted Sarandos went with something for everybody,” a manager says of Bajaria, who presided over content as Netflix added WWE, diversified into live events, brought on video podcasts and generally broadened its offering — a strategy that helped the streamer achieve significant growth but also produced fewer global hits akin to Stranger Things and Adolescence. The company “is now replacing that person with someone who came from film and cares about art,” this manager adds. “Peter is going to come in with a more filmmaker voice-driven approach.”

But Rice is inheriting problems considerably bigger than the programming slate.

For all its scale, Netflix has had a bruising year. Shares in the streamer are down roughly 35 percent since its failed bid to acquire Warner Bros. Discovery last year, and fell to a 52-week low in after-hours trading Tuesday. While Q3 earnings beat Wall Street estimates, the company predicted slower-than-expected growth for its ad business and reduced its ad revenue forecast by $300 million.

“Our engagement is solid, and it will allow us to continue to grow as we have for the last several years, but we know that we can do better, and that better is our upside,” co-CEO Greg Peters told investors during the company’s earnings call on Tuesday. “It’s our goal to go from very good to great.”

The streamer will have fewer soldiers for that effort. Film chief Dan Lin on Monday joined Bajaria and 1,000 other employees in the unemployment ranks after Netflix’s biggest round of layoffs in its history. The 6 percent staff reduction capped a year that has also seen Netflix weather engagement challenges, a sophomore slump for top series and slowing growth.

“The gourmet cheeseburger model resulted in mediocre cheeseburgers,” the manager contends of Bajaria’s approach. “When you hoped for filet, you got gourmet cheeseburgers, and when you make more [of them], it becomes less special.”

So can an old-school Hollywood tastemaker make Netflix special again? And in an entertainment world increasingly dominated by YouTube, is making better Hollywood shows even enough?

I spoke with executives, agents and managers across the industry about the veteran of the traditional studio system stepping into a company that helped dismantle it — and is now seeing its own dominance challenged not only by the new disruptor, YouTube, but by the fragmented viewer attention challenging every platform.

They identified the four priorities that could determine whether Rice can deliver the reset Netflix is counting on — and what a management team under him might look like…