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.

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?”

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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.”

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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.

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.