Reed Hastings, one of the founders of Netflix, has helmed the company since before it was a streaming service, when its business model revolved around sending DVDs by post.
Now, after spending a quarter-century building Netflix into the world’s first major streaming company – and dragging the rest of the media industry with him – Hastings said on Thursday that he was ceding his co-CEO title and becoming the company’s executive chair.
In his place, Netflix is appointing Greg Peters, the company’s chief product and chief operating officer, to join Ted Sarandos as a co-CEO. Sarandos has been in the role since 2020.
Hastings said the executive reorganisation was part of a long-in-the-making succession plan that gestated over several years. In announcing the move, Hastings pointed to Bill Gates and Jeff Bezos as other company founders who moved into chair roles “after they pass the baton to others.”
“In the last two and a half years, I’ve increasingly delegated the management of Netflix to them,” Hastings said in a statement, noting that Sarandos and Peters have dealt with the challenges of the pandemic and upheavals in the streaming industry. “The board and I believe it’s right time to complete my succession.”
He added: “I’ll be helping Greg and Ted, and, like any good chairman, be a bridge from the board to our co-CEOs. I’ll also be spending more time on philanthropy, and remain very focused on Netflix stock doing well.”
The company is also appointing Bela Bajaria, its global head of television, as chief content officer and naming Scott Stuber, its global head of film, to be chair of Netflix Film, a new role.
“We’ve all learned so much from his intellectual rigour, honesty and willingness to take big bets – and we look forward to working with him for many more years to come,” Sarandos said of Hastings. “Since Reed started to delegate management to us, Greg and I have built a strong operating model based on our shared values and like-minded approach to growth.”
Hastings, who had already successfully founded a company called Pure Software, helped found Netflix in 1997 with Marc Randolph as a movie rental-by-mail service. The two put in place a corporate culture of “radical honesty” to the extent that in 1998, Hastings made a PowerPoint presentation to Randolph detailing the reasons he was no longer fit to remain CEO.
Since then, he has been instrumental in the company’s shift to streaming. Although Hastings often repeated the line, “No advertising coming on to Netflix. Period,” it eventually came to pass.
The news regarding Hastings accompanied Netflix’s fourth-quarter earnings announcement. The company said it had added 7.7 million subscribers – well past its forecast of about 4.5 million – crediting the influx of new users to strong fourth-quarter programming.
Netflix said it now has more than 231 million subscribers worldwide. That means that Netflix ended 2022 with more subscribers than it started the year with, despite a disappointing first six months, when it lost more than 1 million subscribers.
Netflix generated about $7.85 billion in revenue in the fourth quarter, a nearly 2% increase from the same period last year. The company generated about $55 million in profit, a 90% decrease from the same period a year earlier.
In a letter to shareholders, Netflix said that its advertising-supported subscription has resulted in subscriber growth and increased customer engagement. The company said it has seen relatively few customers switching from other plans, and that both customers and advertisers have been bullish on the option.
Netflix did not provide any guidance for new subscriber additions the next quarter, after an announcement last year that it would stop providing those closely watched updates to investors. As Netflix’s streaming business has matured, investors and analysts have focused more on revenue growth and profit. But the company said it expected revenue to increase 4% next quarter, with subscriber growth higher in the second quarter of this year compared to the first.
Netflix, which is famous for citing sleep as one of its biggest competitors, acknowledged in its letter that it faces competition from streaming competitors in addition to emerging platforms like TikTok. It also cited traditional television, YouTube and video games as other rivals for potential customers.
Netflix’s advertising tier, priced at $6.99 a month in the United States, was a major reversal for the streaming company, whose executives – Hastings chief among them – had long insisted that they didn’t believe ads were right for the company. But the plan, which debuted in November, has been popular with investors who were spooked by the company’s earlier subscriber losses.
Thursday’s earnings report came a day after Netflix announced that its 2023 film slate would feature 49 movies, including animated and foreign-language films. That is down from 2022, when the company’s ambitions to release a film a week resulted in 61 English-language, live action titles; five animated features; three anime films; and 17 live-action movies in other languages.
Highlights for 2023 include a David Fincher thriller, “The Killer,” starring Michael Fassbender; Zack Snyder’s sci-fi epic “Rebel Moon”; and David Yates’ “Pain Hustlers,” starring Emily Blunt, which the company bought out of the Cannes film festival last year for a reported $50 million. Netflix is also making good on its intent to franchise its content with second iterations of “Murder Mystery” and “Extraction” also set to debut in 2023.
Netflix, which was once unchallenged in the video-streaming market, has faced increased competition from deep-pocketed rivals like Disney, Comcast and Warner Bros. Discovery, companies that it used to rely on for programming. That competition, combined with an increasingly saturated U.S. market, has encouraged Netflix to seek subscribers in international markets, crack down on password-sharing and launch its advertising plan.
In its letter to shareholders, Netflix said that it hoped to increase its subscribers through new initiatives like “paid sharing,” which allows subscribers to add users to accounts for an additional fee.
Netflix also cited the success of its recent programs, including the series “Wednesday” and “Glass Onion: A Knives Out Mystery,” a movie that it screened in a limited number of theatres in the United States before its debut on Netflix. In its last quarter, Netflix also began streaming “The Pale Blue Eyes,” a period-piece detective mystery starring Christian Bale and Harry Melling.
The one real black mark on Hastings’ record was Qwikster, the short-lived DVD portion of the business that Netflix created to differentiate it from the streaming offering. It lasted just one month after 1 million subscribers left the service, unhappy with the price increase that came from splitting the service into two pieces.
In late 2018, Netflix was criticised for pulling an episode of the comedy show “Patriot Act,” starring Hasan Minhaj, from its Saudi Arabia feed because it was critical of Crown Prince Mohammed bin Salman and ran afoul of Saudi censors. Hastings responded by saying, “We’re not trying to do truth to power. We’re trying to entertain.”
In 2021, the company stood by comedian Dave Chappelle when critics inside and outside the company said his stand-up special promoted bigotry against transgender people. A number of employees participated in a walkout to protest Netflix’s decision to leave the content on the site. This article originally appeared in The New York Times.
