New York CNN —
Netflix announced Thursday that its 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 discussed 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 and Greg to chief operating officer alongside me in July 2020 – and over the past 2½ years I’ve increasingly delegated the management of Netflix to them.”
Hastings founded Netflix (NFLX) in 1997 and transformed the way countless households watched movies and shows, first with its DVD-by-mail business and later with its streaming video service.
Led by Hastings, Netflix disrupted legacy film distribution companies like Blockbuster and helped shake up Hollywood by igniting 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.
Over the past year, however, Netflix has seen its stock and reputation take a hit after losing subscribers due to increased competition from rival streaming services. In response, Netflix introduced a lower-priced, ad-supported tier for the first time in its history.
These changes can 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 forecast 4.5 million additions, for a total of more than 230 million paid subscribers worldwide.
The company said its results for the quarter indicate its growth is picking up speed again, thanks in part to popular original programs like Wednesday and Harry & Meghan. It also said its ad-supported subscription offering, which launched in November, has been gaining traction.
“Advertising is still in its infancy and we still have a lot to do,” the company wrote in a letter to shareholders. However, it noted that engagement is better than expected and “we believe the lower price point is driving incremental membership growth.”
Netflix also said it plans to “roll out paid sharing more broadly” later this quarter as part of its effort to crack down on people who share passwords instead of paying for their own accounts.
The company posted quarterly revenue of more than $7.8 billion in December, up just 1.9% year over year but in line with Wall Street analysts’ expectations. For the current quarter, Netflix is forecasting revenue growth of 4%, driven in part by a slight increase in net paid subscriptions, a reversal of the slight decline in subscriptions seen in the first quarter of last year.
Netflix shares rose around 6% in after-hours trading after Thursday’s report.
“Reed Hastings’ resignation from his current position 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 has been sluggish amid a potential recession that is on everyone’s lips.”
While Hasting’s departure from the CEO post marks the end of something of an era, Netflix said the leadership change “makes externally formal how we’ve been working internally.” And Hastings added in his blog post that Sarandos and Peters have “complementary skillsets, deep knowledge of entertainment and technology, and a proven track record 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 only a key executive at Netflix, but also a power player in Hollywood developed.
Peters worked as both COO and chief product officer for Netflix prior to Thursday’s promotion. He previously served as the streaming giant’s International Development Officer, helping to grow 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 am very excited to begin this new chapter with Greg as Co-CEO.”