Reed Hastings is stepping down as CEO of Netflix, the company he co-founded 25 years ago, amid a shakeup at the top of one of Hollywood’s most powerful studios.
Hastings, who started Netflix in 1997 as a DVD-by-mail service, wrote in a blog post that he has increasingly delegated management in recent years. Now is “the right time to complete my succession,” he added.
“Our board has been discussing succession planning for many years (even founders have to evolve!),” wrote Hastings, 62. “I am so proud of our first 25 years and so excited for the next quarter century.”
COO Greg Peters was promoted to co-CEO alongside Ted Sarandos, who was in charge of programming during Netflix’s massive investment period and promoted in 2020 to co-CEO alongside Hastings.
Shares of Netflix jumped more than 6% in after-market trading.
The change comes after Netflix lost more than a third of its market value in the past year after revealing that its decade-long growth spurt was over. Sarandos and Peters will be tasked with regaining momentum and guiding Netflix through a tougher era for the entertainment industry.
Hastings will remain as executive chairman, following the previous examples of Amazon’s Jeff Bezos and Microsoft founder Bill Gates. The billionaire founder said he plans to “spend more time on philanthropy” but “remains very focused on Netflix stock doing well.”
The change at Netflix came after the company said it added 7.7 million subscribers in the fourth quarter, well above expectations, thanks to popular programming such as Wednesday’s spin-off of The Addams Family and the documentary series Harry and Meghan. Netflix predicted it would add 4.5 million subscribers in the quarter.
Sophie Lund-Yates, analyst at Hargreaves Lansdown, said: “As Wall Street buckles under the weight of recession fears and Federal Reserve worries, Netflix’s huge hit in subscriber numbers has injected some much-needed optimism into the mix.”
Netflix stunned investors last April when it revealed it had lost subscribers, triggering a punitive stock market revaluation of the entire US media industry. Since the “Netflix correction,” Wall Street has become more skeptical of the streaming video market, focusing increasingly on profitability and forcing major entertainment groups to be more cost-conscious.
Netflix ended 2022 with 231 million paid subscribers, adding 8 million for the year, its worst annual growth in a decade. In a letter to investors, the company said “2022 was a difficult year, with a bumpy start but a brighter finish.”
Revenue in the quarter rose to $7.9 billion, up 2% from a year ago. Net income fell to $55 million in the quarter, down from $607 million in the same period a year ago, a sharp decline the company attributed in part to the strong U.S. dollar. Operating income fell to $550 million from $632 million.
The company spent $4 billion on content in the quarter, down from $5.7 billion at the same time last year.
Shares of Netflix have recovered somewhat from last year’s lows, gaining 9% this year. But its market valuation of $141 billion is still about half the peak reached during the coronavirus pandemic.
As subscriber growth has slowed, Netflix has taken two major steps to shore up its business: introducing a cheaper version of its ad-supported streaming service and trying to curb password sharing, a practice it had largely shunned. when growth was red hot.
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Netflix moved quickly to create an ad tier in partnership with Microsoft, launching the platform in November for $7 a month. On Thursday, the company said it was “pleased with early results.”
With those two potential new sources of revenue, Netflix has stopped providing guidance to investors about its new subscriber numbers — a symbolic shift for a company whose stock price has soared for years based on subscriber growth.
The promotion of Peters, who played a big role in launching Netflix’s advertising layer, “is an indication of how much the ad business means to Netflix,” said Paul Verna, an analyst at Insider Intelligence.
“In the same way that Sarandos’s earlier elevation . . . was a sign of Netflix’s maturation from a technology company to a film and television studio, the current shift puts advertising at the center of the picture, alongside content.”
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