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Reed Hastings, who co-founded Netflix and led Hollywood’s charge into streaming-first strategy over the past decade, is exiting his role as co-CEO of the media giant but will stay on as executive chairman, the company said Thursday.
As part of the succession, COO Greg Peters will become co-CEO alongside Ted Sarandos, who has held that title since July 2020. In a statement, Hastings said the plan has been in the works for some time, since the elevation of Sarandos and Peters two and a half years ago.
“It was a baptism by fire, given COVID and recent challenges within our business,” Hastings wrote in a post on Netflix’s site. “But they’ve both managed incredibly well, ensuring Netflix continues to improve and developing a clear path to reaccelerate our revenue and earnings growth. So the board and I believe it’s the right time to complete my succession.”
Peters, in particular, has been taking on additional responsibilities at the company, including three top priorities: the launch of the advertising tier, its gaming efforts, and its coming crackdown on password sharing.
“Reed has been grooming Greg for this job for years,” Lightshed analyst Rich Greenfield says. “This is the combination of a product person and a tech person in Greg with a content person in Ted. Netflix is the marrying of content and tech, and it’s important to convey that. This is Reed recognizing that Netflix is more than Reed Hastings, which is admirable for a sector that has let ego get in the way of succession time and again.”
In addition, Hastings announced that Bela Bajaria has been promoted to Netflix chief content officer, and Scott Stuber has been named chairman of Netflix Film.
“I want to thank Reed for his visionary leadership, mentorship and friendship over the last 20 years,” Sarandos said in a statement. “Since Reed started to delegate management to us, Greg and I have built a strong operating model based on our shared values and like-minded approach to growth. I am so excited to start this new chapter with Greg as co-CEO.”
The company disclosed in a securities filing that Hastings’ shift to executive chairman and Peters’ promotion to co-CEO were effective as of Jan. 13, with Peters also set to join the board. In connection with the changes, Hastings will take a significant pay cut (from $34.6 million to an estimated $3 million), while Peters will earn an estimated $33.6 million.
On the company’s earnings call, Hastings said the succession plan began to be put in motion about 10 years ago, and was accelerated with their promotions.
“They both have such amazing talents and gifts, and to find a platform where they’ve been able to contribute is fantastic,” Hastings said. “This is acknowledging, in formal terms, how we’ve been operating for at least the last few quarters.”
“In the last two and a half years, particularly, we’ve been able to build a really trusting respectful and complementary partnership, in many ways the same one I had with Reed over the years,” Sarandos added on the call. “And I really do believe that this kind of shared leadership model is going to help us to move fast and to challenge each other, and to challenge the company to race to new heights.”
Hastings, of course, is already one of Netflix’s largest individual shareholders.
The departure marks the end of an era for Netflix, though Hastings, as executive chairman, will continue to play a role in the company’s future, just as Jeff Bezos does at Amazon.
“For myself, I’ll be helping Greg and Ted, and, like any good Chairman, be a bridge from the board to our co-CEOs,” Hastings wrote Thursday. “I’ll also be spending more time on philanthropy, and remain very focused on Netflix stock doing well.”
Hastings began Netflix in 1997 with Marc Randolph and has overseen every strategic maneuver since, from billing itself as “the world’s largest online DVD rental store,” to finding ways to take on and ultimately topple early rival Blockbuster (“Movie renters are fed up with due dates and late fees,” Hastings once proclaimed).
The founding executive led its prescient push into streaming, its major investment in original film and TV content, the ill-fated DVD spinoff proposal called Quickster — a plan that was scrapped within a span of months in 2011 — and more recently the company’s investments in gaming and advertising. And Hastings is also responsible for Netflix’s unique corporate culture, which values extreme transparency and is known for its frequent turnover.
The company, which he took public in 2002 with a share price of $15, now trades on the NASDAQ at $319 a share and boasts 230 million-plus subscribers globally.
Hastings often referred to Netflix as a sports team looking to recruit the best players, and once a player is seen as past their prime, they are given a generous severance and asked to leave. That has been the case for many top Netflix executives over the years, from Randolph and former Netflix originals chief Cindy Holland to one of the architects of that culture, former Netflix HR head Patty McCord. Not even Hastings, it seems, is immune to the rule.
In the mid-2000s, Netflix’s earnings were also judged in part by subscriber additions, though at the time it was to its mail service, which competed with (and then far outpaced) a Blockbuster retail offering, ultimately leading to the latter’s demise. In 2006, Netflix launched Red Envelope Entertainment, a film financing and acquisition division, but shut it down less than two years later, citing competition from Hollywood studios in the space.
As Netflix began to expand its streaming offering, Hollywood studios took notice of the rich licensing deals it could extract from the platform as an add-on to traditional pay TV deals. As Netflix picked up streaming rights in the early 2010s to TV hits like Mad Men, The Office, The Walking Dead and many others, it built a streaming subscriber base that the service could then leverage as an audience for its own original programming.
Netflix, and Hastings, also pioneered what’s now standard practice among streaming platforms: withholding most viewership data. The streaming giant then jumped into scripted series with the 2013 debuts of the David Fincher-directed political series House of Cards and a revival of Fox sitcom Arrested Development, featuring the original cast. With those premieres, the executive pioneered the “binge” model of debuting all episodes of a season at once.
Netflix’s decade of astronomical growth hit a big roadblock last year with the company disclosing subscriber losses for two straight quarters. The streaming giant also reluctantly unveiled plans for an advertising tier in order to diversify its revenue beyond subscriptions alone.
Kim Masters contributed reporting.
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