LOS ANGELES: Netflix co-founder Reed Hastings said on Thursday (Jan 19) that he will step down as chief executive, handing the reins of the streaming service to long-time partner and co-CEO Ted Sarandos and the company’s chief operating officer, Greg Peters.
Shares of the company, which had fallen nearly 38 per cent in the past year, rose 6.1 per cent to US$335.05 in after-hours trading as the streaming video pioneer also said that it had picked up more subscribers than expected at the end of last year.
Netflix has been under pressure after losing customers in the first half of 2022.
Sarandos and Peters will share the title of chief executives, with Hastings serving as executive chairman. The change is effective immediately, representing the culmination of a decade of succession planning by the board.
Both Peters and Sarandos were promoted in July 2020 amid a challenging time for the company.
“It was a baptism by fire, given COVID and recent challenges within our business,” Hastings said in a statement. “But they’ve both managed incredibly well … so the board and I believe it’s the right time to complete my succession.”
Hastings made his exit as Netflix said that it added 7.66 million subscribers in the fourth quarter, beating Wall Street forecasts of 4.57 million with help from Harry & Meghan and Wednesday in the battle to attract streaming television viewers.
Earnings per share, however, came in at US$0.12, below the US$0.45 expected by analysts polled by Refinitiv.
Netflix projected “modest” gains in subscribers through March. It forecast 4 per cent year-over-year growth in revenue during the period with the help of new revenue streams.
The company is facing restrained consumer spending and competition from Walt Disney, Amazon and others spending billions of dollars to make TV shows and movies for online audiences.
Netflix lost customers in the first half of 2022. It returned to growth in the second half, but new customer additions remain below the pace of recent years.
To kick-start growth, Netflix introduced a cheaper, ad-supported option last November in 12 countries. It also has announced plans to crack down on password sharing.
In its quarterly letter to shareholders, Netflix said: “2022 was a tough year, with a bumpy start but a brighter finish. We believe we have a clear path to reaccelerate our revenue growth.”
The company’s global subscriber base hit 231 million at the end of December.
Audiences flocked to Addams family tale Wednesday, the third-most watched show in Netflix history, the company said. Murder mystery Glass Onion and British royals documentary Harry & Meghan also were hits during the quarter.
Net income fell to US$55 million or US$0.12 per share, from US$607 million or US$1.33 per share a year earlier. Revenue rose 1.9 per cent to US$7.85 billion, in line with expectations.
Hastings, 62, co-founded Netflix as a DVD-by-mail business in 1997, saying the idea came from his frustration at having returned a rental of Apollo 13 to the local Blockbuster video store and getting socked with a US$40 late fee.
The business evolved in 2007 to a video streaming service that upended Hollywood, prodding Netflix’s media rivals to invest billions in their own services.
Some of Hastings’ challenges were self-inflicted, such as his plan to spin off the company’s DVD business into a new company called Qwikster. That 2011 initiative cost the company 800,000 subscribers and sent the stock plunging.
The executive navigated another precipitous stock drop in April 2022, when Netflix reported its first subscriber loss in more than a decade. This forced Hastings to reconsider previously verboten ideas to spur growth, including an ad-supported version of the service.