Netflix (NFLX) isn’t only changing the way countless consumers access content. It's also driving up Hollywood salaries.
With the leading streaming service committed to spending billions of dollars to create content, including luring top talent its way, it has been angering competitors in the industry who are forced to pay higher salaries and offer pricey compensation to keep talent from jumping ship.
According to a report in Bloomberg News, citing people familiar with the matter, Netflix has successfully poached employees by offering big pay raises. New hires are landing salaries that in many cases double what they were making and include stock options and other perks. It doesn’t hurt that Netflix has a war chest of $10 billion slated for programming and marketing as well as a stock price that continues to march higher. It has created a situation where the traditional movie studios and TV networks are having a tough time keeping up, which wouldn’t think twice about spending $300 million for a high profile producer. Case in point: when Netflix recently poached acclaimed television writer and producer Shonda Rhimes from ABC Studios and The Walt Disney Co. (DIS). It was widely reported that Rhimes is getting $10 million a year for multiple years. (See more: Netflix Banned From Cannes Film Festival.)
But it's not just the big name talent that Netflix is willing to pay up for. According to Bloomberg, it has been luring publicists to the firm with salaries and compensation of as much as $400,000. Another tactic: doubling the paychecks of what publicists previously made. The report noted that Netflix is spending aggressively in marketing and public relations, earmarking $2 billion this year to hype its service and shows. Bloomberg noted it has close to 500 open jobs on its website with more than fifty in marketing and public relations and around a third based in Los Angeles.
More senior professionals are also getting hefty offers to join the streaming service. According to Bloomberg, Netflix bases compensation on the candidate's experience and title and then pays the person at the top of the pay scale. Employees are allowed to take as much as 50% of their compensation in stock options. (See more: Why Netflix Stock Can Soar Long-Term Defying Bears.)
With experienced workers in short supply in Hollywood, Netflix has had no choice but to get aggressive when it comes to recruitment and retainment. After all rivals including Amazon (AMZN) and Apple (AAPL) are circling. Meanwhile, traditional media companies like Walt Disney (DIS) are gearing up to launch competing streaming content services. Still, Netflix's spending has raised the concerns of some Wall Street watchers who aren't convinced the company will be profitable if it keeps spending at the current pace. “Do we worry about overpaying? Always,” Chief Executive Reed Hastings said to reporters earlier this month reported Bloomberg. “We’re trying to be good stewards of the customers’ money.” Investors seem to agree. So far this year share of Netflix are 57% higher, as of this writing.