With Netflix Membership Growing Again, Co-CEO Reed Hastings Steps Down

Netflix founder and chief executive for 25 years, Reed Hastings, has stepped down from his role as co-CEO to become 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 served as Netflix’s chief operating officer for three years and chief product officer for six.

The succession was announced on Thursday as Netflix reported better-than-expected growth in the fourth quarter, capping a turbulent year that previously included the launch of advertising, the company’s first subscriber losses in a decade and the promise of crackdown on password sharing.

netflix, the world’s leading video streaming subscription service, said membership grew by 7.66 million to 230.75 million in total between October and December. This exceeded Netflix’s October forecast to add 4.5 million new members. It also beat average analyst expectations, which were slightly more optimistic at 4.57 million new members, according to Refinitiv. The latest growth is a rebound from the first half of last year, when Netflix posted unprecedented subscriber losses.

Shares rose 5.9% to $334.29 in early trading on Friday. Through Thursday’s close, the stock had lost more than a third of its value in the past 12 months, as the drama of Netflix’s membership growth and worries about the broader economy made anxious investors.

In a separate post about his decision to step down as chief, Hastings wrote that he had already delegated management to Sarandos and Peters for more than two years.

β€œIt was a baptism of fire, considering COVID and recent challenges within our business,” Hastings said. “But they’ve both done incredibly well, ensuring that Netflix continues to improve and develop a clear path to re-accelerate our revenue and earnings growth. So the board and I believe that is the right time to complete my estate.”

Prior to this year, Netflix’s relentless subscriber growth prompted nearly every major Hollywood media company to embrace streaming as the future of television. If they poured billions into their own streaming operations, the so-called continuous wars caused a wave of new services, including Apple TV Plus, Disney+, HBO Max, Peacock and Paramount More.

The flood of streaming options complicates the number of services you have to use (and, often, pay for) to watch your favorite shows and movies online. But it has also heightened competition from Netflix, intensifying the company’s battle to win new members and retain the ones it has. The pressure pushed Netflix to pursue strategies it had rejected or avoided for years: in November, the company launched cheaper ad-supported subscriptionsand this will expand a crackdown on password sharing this year to more countries than the few Latin American markets where it is already testing account sharing fees.

On Thursday, Peters said password fees would start rolling out more widely later in Q1 and would take a few quarters to fully roll out.

Netflix also said members of its new ad-supported plan were watching more than the company expected, with their engagement matching that of ad-free members.

“Also, as expected, we’ve seen very little change from other plans,” Netflix said in its report, meaning it thinks people aren’t upgrading to the cheaper, funded tier. advertising from a more expensive and ad-free tier. a lot.

This contradicts third-party estimates that the opposite is happening. Earlier this week, a study by data and consulting firm Kantar claimed that downside trading accounted for nearly all Netflix ad-supported subscriptions in the first two months of the tier’s launch.

Asked about the possibility of a free version of Netflix with advertising, Sarandos said the company is open to all sorts of business models but has no plans to pursue a free tier this year. Instead, it is focused on both expanding the “Basic with ads” paid offering and launching the account sharing fee system. “We have a lot to do this year,” he said.

As part of the executive shuffle, Netflix’s Bela Bajaria, formerly head of global television, has become chief content officer, a title Sarandos previously held. Scott Stuber has been named president of Netflix film.

In the fourth quarter, Netflix added 910,000 streaming customers in the United States and Canada for a total of 74.3 million. In Europe, the Middle East and Africa, membership grew by 3.2 million to 76.73 million. In Latin America, subscribers increased by 1.76 million to 41.7 million. And in the Asia-Pacific region, 1.8 million new members expanded its base to 38.02 million.

Overall, Netflix posted earnings of $55.3 million, or 12 cents per share, compared with $607.4 million, or $1.33 per share, a year earlier. Revenue rose 1.9% to $7.852 billion.

Analysts had expected earnings to be an upside surprise, predicting earnings per share of 45 cents versus Netflix’s forecast of 36 cents. The consensus revenue estimate was $7.848 billion.

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