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Netflix co-founder Reed Hastings resigns as CEO

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Reed Hastings is stepping down as chief executive of Netflix, the company he co-founded 25 years ago, in a revamp at the top of one of Hollywood’s most powerful studios.

Hastings, who launched 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,” she added.

“Our board has been discussing succession planning for many years (even founders need to evolve!),” Hastings, 62, wrote. “I am very proud of our first 25 years and very excited for our next quarter century.”

COO Greg Peters has been promoted to Co-CEO with Ted Sarandos, responsible for programming during Netflix’s high investment period and promoted in 2020 to Co-CEO alongside Hastings.

Netflix shares jumped more than 6% in after-hours trading.

The shift comes as Netflix lost more than a third of its market value last year after revealing that its decade-long growth spurt had come to an end. Sarandos and Peters will be tasked with regaining momentum and leading Netflix into a more austere era for the entertainment industry.

Hastings will remain as executive chairman, following the earlier examples of Jeff Bezos of Amazon and Bill Gates, founder of Microsoft. The billionaire founder said he plans to “spend more time on philanthropy” but “remain very focused on Netflix stock performance.”

The shift at Netflix came as the company said it added 7.7 million subscribers in the fourth quarter, well above expectations thanks to popular programming like the Addams Family spinoff. Wednesday and the Harry & Meghan documentary series. Netflix 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 Federal Reserve jitters, Netflix’s massive hit in subscriber numbers has injected some much-needed optimism into the mix.”

Netflix surprised investors last April when it revealed it had lost subscribers, triggering a punitive stock market revaluation of the entire US media industry. After the “Netflix fix”, Wall Street has become more skeptical of the streaming video market, increasingly focusing on profitability and forcing big 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 that “2022 was a difficult year, with a bumpy start but a brighter end”.

Revenue for the quarter rose to $7.9 billion, up 2% from a year earlier. Net income fell to $55 million for the quarter from $607 million in the same period a year earlier, a sharp decline the company attributed in part to the strong dollar. Operating profit fell to $550 million from $632 million.

The company spent $4 billion on content in the quarter, up from $5.7 billion in the same period last year.

Netflix shares have recovered slightly 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 slows, Netflix has taken two significant steps to shore up its business: introducing a cheaper ad-supported version of its streaming service and trying to limit password sharing, a practice it had largely ignored when the growth was on the rise.

Netflix moved quickly to create an advertising tier in partnership with Microsoft, launching the platform in November for $7 a month. The company said on Thursday that it was “satisfied with the first results”.

With these two potential new sources of revenue, Netflix has stopped providing guidance to investors on the number of new subscribers – a symbolic shift for a company whose stock price has skyrocketed for years based on subscriber growth.

Peters’ promotion, which played a key role in launching Netflix’s ad 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 as the previous elevation of Sarandos. . . was a sign of Netflix’s maturation from a technology company to a film and TV studio, the current shift puts advertising at the center of the image alongside content.”