Netflix founder and chief executive for 25 years, Reed Hastings, has stepped down from his role as co-CEO to serve as executive chairman instead. Current co-CEO Ted Sarandos will continue to lead the streaming giant, and he will be joined by new co-CEO Greg Peters, who has served as Netflix’s chief operating officer for three years and chief product officer for six years.
The successor was announced Thursday, as Netflix reported better-than-expected fourth-quarter growth, capping a turbulent year that had earlier seen the launch of advertising, the company’s first subscriber losses in a decade and promises of a crackdown on the joint use of passwords included.
Netflix, the world’s dominant streaming video subscription service, announced that its members grew by 7.66 million between October and December for a total of 230.75 million. That beats Netflix’s October forecast of adding 4.5 million new members. It’s also beating the average analyst expectation, according to Refinitiv, which was a bit more optimistic with 4.57 million new members. The latest growth is a rebound from the first half of last year, when Netflix saw unprecedented subscriber losses.
Shares are up 5.9% to $334.29 in the last trade. By Thursday’s close, the stock had lost more than a third of its value over the past 12 months as drama surrounding Netflix’s membership growth and worries about the broader economy unsettled investors.
In a separate post about his decision to step down as boss, Hastings wrote that he had been delegating management to Sarandos and Peters for more than two years.
“It’s been a baptism of fire given COVID and the recent challenges at our company,” Hastings said. “But they’ve both done incredibly well, ensuring Netflix has continued to improve and develop a clear path to accelerate our revenue and earnings growth again. As such, the board and I believe it is the right time to complete my succession.”
Prior to this year, Netflix’s unabated subscriber growth has led almost every major Hollywood media company to embrace streaming as the future of television. As they poured billions of dollars into their own streaming operations, the so-called streaming wars spawned a wave of new services, including Apple TV Plus, Disney Plus, HBO Max, Peacock, and Paramount Plus.
The deluge of streaming options complicates how many services you have to use (and often pay for) to watch your favorite shows and movies online. But it’s also intensified competition from Netflix, intensifying the company’s struggle to attract new members and retain the ones it has. The pressure has pushed Netflix to pursue strategies it had discarded or avoided for years: in November, the company rolled out cheaper subscriptions supported by ads, and it will be cracking down on password sharing across more countries this year as the few Latin American markets expand It is already testing account sharing fees.
On Thursday, Peters said password fees would roll out more broadly later in the first quarter and would take a couple of quarters to fully roll out.
Netflix also said members of its new ad-supported plan are seeing more than the company expects, with their engagement matching that of ad-free members.
“Also, as expected, we’ve seen very few switches from other plans,” Netflix said in its report — meaning it doesn’t think people are trading down from a more expensive, ad-free to the cheaper, ad-supported tier very much.
This contradicts third-party estimates that the opposite is happening. Earlier this week, a study by data and consulting firm Kantar claimed that in the first two months after the tier’s launch, almost all of Netflix’s ad-supported subscriptions were due to down-trading.
When asked about the possibility of a free version of Netflix with ads, Sarandos said the company is open to all kinds of business models but has no plans to go for a free tier this year. Instead, it’s focused on both expanding the “Basic with ads” paid offering and rolling out the account-sharing fee system. “We have a lot to do this year,” he said.
As part of the executive reshuffle, Netflix’s formerly head of global television, Bela Bajaria, was appointed chief content officer, a title Sarandos previously held. Scott Stuber has been appointed chairman of Netflix Film.
In the fourth quarter, Netflix added 910,000 streaming customers in the US and Canada for a total of 74.3 million. In Europe, Middle East and Africa, membership increased by 3.2 million to 76.73 million. In Latin America, the number of subscribers grew by 1.76 million to 41.7 million. And in Asia Pacific, 1.8 million new members expanded their base there to 38.02 million.
Overall, Netflix reported earnings of $55.3 million, or 12 cents a share, compared to $607.4 million, or $1.33 a share, a year earlier. Revenue rose 1.9% to $7.852 billion.
Analysts had expected the earnings to surprise on the upside, forecasting earnings per share of 45 cents versus Netflix’s forecast of 36 cents. The consensus estimate for sales was $7.848 billion.
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