Netflix Founder Reed Hastings Steps Down as CEO

VIVA – Netflix announced on Thursday, January 19, 2023, that its founder, Reed Hastings is stepping down as CEO at the company and he gives his role to the co-CEOs Ted Sarandos and Greg Peters.

Netflix shares rose 6.1 percent to US$335.05 in after-hours trading as the US video streaming pioneer said it gained more subscribers than expected at the end of last year. As noted, Netflix is under pressure after losing subscribers in the first half of last year. Its shares, once the darling of Wall Street, have fallen nearly 38 percent in 2022.

Ted Sarandos and Greg Peters will jointly become CEO. The change will take effect immediately and is the culmination of a decade of succession planning by the board. Both Peters and Sarandos were promoted in July 2020 amid a difficult time for the company.

"It was a 'baptism by fire' given Covid-19 and the recent challenges in our business. But they've both done very well, so the board and I believe it's the right time to compete for my succession," Hastings said in a statement.

He resigned as Netflix added 7.66 million subscribers in the fourth quarter of last year beating Wall Street estimates of 4.57 million with help from 'Harry & Meghan' and 'Wednesday' in the battle to attract streaming video viewers.

Reed Hastings co-founded Netflix as a DVD-by-mail business in 1997 saying the idea came from his frustration at returning a rental of "Apollo 13" to the local Blockbuster video store and getting a US$40 late fee.

The business evolved in 2007 into a video streaming service that rocked Hollywood prompting Netflix's media rivals to invest billions in their services.

Netflix projected modest gains in the subscriber category through March of this year, forecasting 4 percent year-over-year revenue growth during that period with the help of new revenue streams.

The company faces restrained consumer spending and competition from Walt Disney, Amazon.com, and others who are spending billions of US dollars to create TV shows and movies for online viewers. Netflix lost subscribers in the first half of 2022. Its growth returned in the second half, but new subscriber additions remained below the pace of recent years.

To kickstart growth, Netflix introduced cheaper ad-supported options in November last year in 12 countries. It has also announced plans to crack down on password sharing, "The year 2022 was tough. A bumpy start but a brighter end. We believe we have a clear path to re-accelerate our revenue growth," Netflix said in its quarterly letter to shareholders.

Netflix will start rolling out the feature this quarter, to try and convert more password sharers into paying subscribers, Peters said.

He also acknowledged it wouldn't be a universally popular move, comparing it to a price increase that would temporarily increase cancellations but pay off with additional revenue.

The company's global subscriber base reached 231 million by the end of December 2022. Net income fell to US$55 million, or 12 cents per share, from US$607 million, or US$1.33 per share, a year earlier. Revenue rose 1.9 percent to US$7.85 billion, in line with expectations.