Netflix co-founder Reed Hastings will step down as CEO

Reed Hastings is stepping down as CEO of Netflix, the company he founded 25 years ago 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 in recent years he has been delegating more and more management. Now is “the right time to complete my succession,” he said.

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

Chief operating officer Greg Peters has been promoted to co-executive with Ted Sarandos, who was responsible for programming during Netflix’s massive investment period and who was promoted to 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 last year after revealing that its decades-long growth spurt was coming to an end. Sarandos and Peters will be charged with regaining momentum and leading Netflix through a tougher time for the entertainment industry.

Hastings will remain in the executive chair, following the past examples of Amazon’s Jeff Bezos and Microsoft founder Bill Gates. The billionaire founder said he plans to “spend more time to philanthropy” but is “very focused on Netflix stock doing well.”

The shift at Netflix comes as the company said it added 7.7 million subscribers in the fourth quarter, well above expectations, thanks to popular programs like the Addams Family spin-off. Wednesday and Harry and Meghan documentary series. Netflix predicted it would add 4.5 million subscribers in the quarter.

Sophie Lund-Yates, an analyst at Hargreaves Lansdown, said: “While Wall Street has been weighed down by recession fears and the weight of Federal Reserve jitters, Netflix’s big hit to subscriber numbers has dampened much-needed optimism.”

Netflix stunned investors last April when it announced it was losing subscribers, prompting a stock market revaluation of the entire US media industry. After the “Netflix Fix,” Wall Street became more skeptical of the streaming video market, increasingly focused on profitability and forcing big entertainment groups to spend more.

Netflix ended 2022 with 231 million paying subscribers, adding 8 million over the year, its worst annual growth in a decade. “2022 is a tough, tough start, but with a brighter finish,” the company said in a letter to investors.

Revenue in the quarter rose 2 percent to $7.9 billion from a year earlier. Net income fell to $55 million in the quarter, down $607 million from the same period a year ago, a sharp decline the company attributed in part to a stronger U.S. 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 in the same period last year.

Shares of Netflix have recovered slightly from last year’s lows, gaining 9 percent this year. But its $141 billion market cap is still half of its peak during the coronavirus pandemic.

As subscriber growth has slowed, Netflix has taken two key steps to bolster its business: offering a cheaper version of its streaming service with ads and trying to limit password sharing.

Netflix moved quickly to create a shared advertising tier with Microsoft, launching the platform in November for $7 a month. On Thursday, the company said it was “pleased with the initial 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 share price has risen for years based on subscriber growth.

Paul Verna, an analyst at Insider Intelligence, said the promotion of Peters, who was instrumental in launching Netflix’s advertising tier, “is an indication of how important the advertising business is to Netflix.”

“Similarly, Sarandos’ previous rise . . . It was a sign of Netflix’s transformation from a tech company to a film and TV studio, with the current shift putting advertising at the center of the picture alongside content.

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