Reed Hastings is stepping down as CEO of Netflix, the company he co-founded 25 years ago, in a shakeup at the top of one of Hollywood’s most powerful studios.
Hastings, who launched Netflix as a DVD-by-mail service in 1997, wrote in a blog post that he’s been delegating management more and more in recent years. This is “the right time to finalize my succession,” he added.
“Our board has been discussing succession planning for years (even founders need to evolve!),” wrote Hastings, 62. “I’m so proud of our first 25 years and so excited about our next quarter century.”
Chief operating officer Greg Peters has been promoted to co-chief executive with Ted Sarandos, who was in charge of programming during Netflix’s massive investment period and promoted to co-chief executive alongside Hastings in 2020.
Netflix shares rose more than 6 percent in after-hours trading.
The change comes as Netflix lost more than a third of its market value in the past year after it was revealed that its decade-long growth spurt had come to an end. Sarandos and Peters are tasked with regaining momentum and leading Netflix through a more austere era for the entertainment industry.
Hastings will remain on as executive chairman, following the lead of Amazon’s Jeff Bezos and Microsoft founder Bill Gates. The billionaire founder said he plans to “dedicate more time to philanthropy” but “remain very focused on doing well for Netflix stock.”
The change on top of Netflix came as the company reported that it had added 7.7 million subscribers in the fourth quarter, well ahead of expectations thanks to popular shows like the Addams Family spin-off. Wednesday and the Harry and Megan documentary series. Netflix had predicted it would add 4.5 million subscribers in the quarter.
Sophie Lund-Yates, analyst at Hargreaves Lansdown, said: “As Wall Street sinks under the weight of recession fears and the jitters of the Federal Reserve, Netflix’s massive surge in subscriber numbers has injected much-needed optimism into the mix. brought.”
Netflix stunned investors last April when it revealed it had lost subscribers, sparking a punishing stock market revaluation of the entire US media industry. Following the “Netflix correction,” Wall Street has become more skeptical of the streaming video market, increasingly focusing on profitability and forcing major entertainment groups to be more cost-conscious.
Netflix ended 2022 with 231 million paying subscribers, an increase of 8 million for the year, its worst annual growth in a decade. In a letter to investors, the company said “2022 has been a tough year, with a bumpy start but a better finish”.
Revenue in the quarter rose to $7.9 billion, up 2 percent from a year ago. Net profit fell to $55 million in the quarter, down from $607 million in the same period a year ago, a sharp drop the company attributed in part to the strong US dollar. Operating income fell from $632 million to $550 million.
The company spent $4 billion on content in the quarter, up from $5.7 billion at the same time last year.
Shares in Netflix have recovered somewhat from last year’s lows and are up 9 percent this year. But the $141 billion market valuation is still about half the high it reached during the coronavirus pandemic.
As subscriber growth slows, Netflix has taken two major steps to bolster its business: introducing a cheaper version of its streaming service with ads and trying to limit password sharing, a practice it had largely ignored at the time. the growth was red-hot.
Netflix quickly moved to create an advertising layer in partnership with Microsoft, launching the platform in November for $7 a month. The company said on Thursday it was “satisfied with the initial results.”
With these two potential new revenue streams, Netflix has stopped providing guidance to investors on 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 major role in launching Netflix’s ad level, “is an indication of how much the ad business means to Netflix,” said Paul Verna, an analyst with Insider Intelligence.
‘In the same way as Sarandos’ earlier exaltation. . . was a sign of Netflix’s maturation from a tech company to a movie and TV studio, the current shift puts advertising at the center of the picture, alongside content.