Netflix announced Thursday that founder Reed Hastings is stepping down as co-CEO of the company and will serve as executive chairman. Hastings will be replaced by co-CEOs Ted Sarandos and Greg Peters.
“Our board has been discussing succession planning for many years (even founders need to evolve!),” Hastings wrote in a blog post Thursday. “As part of that process, we promoted Ted to co-CEO with me in July 2020, and Greg to chief operating officer – and over the past 2½ years I’ve increasingly delegated management of Netflix to them.”
Hastings founded Netflix (NFLX) in 1997 and changed the way countless households watched movies and shows, first with his DVD-by-mail company and later with his streaming video service.
Under Hastings’ leadership, Netflix disrupted outdated movie rental companies like Blockbuster and helped shake up Hollywood by sparking an arms race by investing in original content. It also survived a notable misstep in 2011 when the company briefly planned to spin off its streaming service from its DVD business, rebranding the latter as Qwikster.
Last year, however, saw Netflix take a hit to its stock and reputation after losing subscribers amid heightened competition from rival streaming services. In response, Netflix introduced a lower-priced, ad-supported tier for the first time in its history.
Those changes can pay off. In its earnings report on Thursday, the streamer said it added more than 7.6 million subscribers during the last three months of last year, well above the 4.5 million additions it expected, for a total of more than 230 million paying subscribers. subscribers worldwide.
The company said its results for the quarter indicate growth is accelerating again, thanks in part to popular original programs such as “Wednesday” and “Harry & Meghan.” It also said its ad-supported subscription offering, which launched in November, has gained popularity.
“It’s still early days for advertising and we have a lot to do,” the company wrote in a letter to shareholders. But it noted that engagement is better than expected and “we believe the lower price is driving incremental membership growth.”
Netflix also said it plans to “roll out paid sharing more widely” later this quarter, as part of its effort to crack down on people who share passwords rather than pay for their own accounts.
The company posted sales of more than $7.8 billion in December, up just 1.9% from the previous year but in line with Wall Street analysts’ expectations. For the current quarter, Netflix forecasts revenue growth of 4%, driven in part by a modest increase in paid net subscriptions, a reversal from the slight decrease in subscriptions in the first quarter of last year.
Shares of Netflix rose about 6% in after-hours trading following Thursday’s report.
“Reed Hastings’ stepping down from his current role raises many questions about Netflix’s future strategy,” Jamie Lumbley, an analyst at investment firm Third Bridge, said in a statement. “While the subscriber growth numbers are encouraging, revenue growth is slow with the backdrop of a possible recession looming on everyone’s mind.”
While Hastings’ departure from the CEO position marks the end of an era of sorts, Netflix said the leadership change “formulates externally how we’ve operated internally.” And Hastings added in his blog post that Sarandos and Peters have “complementary skills, in-depth knowledge of entertainment and technology, and a proven track record with Netflix.”
Sarandos has led Netflix’s content business since 2000 and pioneered the company’s transition to producing original content in 2013. In the process, he emerged not only as a key leader at Netflix, but also as a powerful player in Hollywood.
Prior to Thursday’s promotion, Peters served as both COO and Chief Product Officer for Netflix. He previously served as the streaming giant’s international development officer and helped expand the company’s overseas distribution.
“Since Reed began delegating management to us, Greg and I have built a strong operating model based on our shared values and like-minded approach to growth,” Sarandos said in a statement. “I’m so excited to start this new chapter with Greg as co-CEO.”