Netflix announced on Thursday that its founder Reed Hastings is stepping down as co-CEO of the company and will become 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 this process, we promoted Ted to co-CEO alongside me in July 2020, and Greg to COO – and over the course of 2 ½ years I have further in addition delegated the management of Netflix.”
Hastings founded Netflix (NFLX) in 1997 and changed the way countless homes watched movies and shows, first with its DVD-by-mail business and then with its video streaming service.
Under Hastings, Netflix disrupted old movie rental companies like Blockbuster and helped shake up Hollywood by starting 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, with the latter to be rebranded as Qwikster.
Last year, however, Netflix saw its stock and reputation take a hit after losing subscribers amid increased competition from competing streaming services. In response, Netflix introduced a low-cost, ad-supported tier for the first time in its history.
These changes could pay off. In its earnings report on Thursday, the streamer said it added more than 7.6 million subscribers in the last three months of last year, well above the 4.5 million additions that it had planned for a total of more than 230 million paid subscribers worldwide.
The company said results for the quarter indicated its growth was reaccelerating, thanks in part to popular original shows like “Wednesday” and “Harry & Meghan.” It also said its ad-supported subscription offering, which launched in November, has gained traction.
“It’s still early days for ads and we have a lot to do,” the company wrote in a letter to shareholders. But he noted that engagement is better than he expected and “we think the lower price is driving further growth in memberships.”
Netflix also said it plans to “start rolling out paid sharing more widely” later this quarter, as part of its efforts to crack down on people who share passwords rather than pay for their own accounts.
The company posted revenue of more than $7.8 billion for the December quarter, up just 1.9% from a year earlier 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 subscription net additions, a reversal from the slight drop in subscriptions during the first quarter of the year. last.
Netflix shares rose about 6% in after-hours trading after Thursday’s report.
“Reed Hastings’ resignation 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 subscriber growth numbers are encouraging, revenue growth is slow with the backdrop of a potential recession looming on everyone’s mind.”
While Hastings’ departure as CEO represents the end of an era of sorts, Netflix said the change in leadership “makes the way we operate internally formal on the outside.” And Hastings added in his blog post that Sarandos and Peters have “complementary skills, deep knowledge of entertainment and technology, and proven track records at Netflix.”
Sarandos has led Netflix’s content operations since 2000 and pioneered the company’s transition to producing original content in 2013. In the process, he has become not just a key leader at Netflix, but a powerful player. at Hollywood.
Peters worked as both COO and head of product for Netflix prior to Thursday’s promotion. He previously served as the streaming giant’s head of international development, helping to 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 similar growth approach,” Sarandos said in a statement. “I’m so excited to start this new chapter with Greg as co-CEO.”