Netflix co-founder Hastings steps down as CEO as company adds subscribers By Reuters

By Lisa Richwine and Dawn Chmielewski

LOS ANGELES (Reuters) – Netflix Inc co-founder Reed Hastings has quit as chief executive of the company that disrupted Hollywood by bringing movies and TV shows online, leaving the reins to his partner longtime and co-CEO Ted Sarandos and Managing Director Greg Peters.

Shares of Netflix (NASDAQ:) rose 6.1% to $335.05 in after-hours trading as the streaming video pioneer also said it attracted more subscribers than expected to the end of last year.

The company has been under pressure after losing customers in the first half of 2022. Its stock, once a Wall Street darling, had fallen nearly 38% in the past year.

Sarandos and Peters will share the title of managing directors, with Hastings serving as executive chairman. The change is effective immediately, representing the culmination of a decade of succession planning by the board. Peters and Sarandos were promoted in July 2020 at a difficult time for the company.

“It was a baptism of fire, given Covid and recent challenges within our business,” Hastings said in a statement. “But they’ve both done incredibly well… so the board and I think it’s a good time to compete for my succession.”

Hastings made its exit as Netflix said it added 7.66 million subscribers in the fourth quarter, beating Wall Street’s forecast of 4.57 million with the help of ‘Harry & Meghan’ and ‘Wednesday’ in the battle to attract streaming viewers.

Earnings per share, however, came in at 12 cents, below the 45 cents expected by analysts polled by Refinitiv.

Netflix forecast “modest” subscriber gains through March. It forecasts 4% year-over-year revenue growth over the period driven by new revenue streams.

The company faces restrained consumer spending and competition from Walt disney (NYSE:) Co, Amazon.com Inc (NASDAQ:) and others spend billions of dollars creating 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 spur growth, Netflix introduced a cheaper, ad-supported option in November in 12 countries. He also announced his intention to crack down on password sharing.

“2022 has been a tough year, with 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 features this quarter to try to convert more password sharers into paying subscribers, Peters said. He acknowledged it wouldn’t be a “universally popular move”, likening it to a price increase that will increase cancellations for a while but pay off in additional revenue.

The company’s global subscriber base reached 231 million at the end of December.

Audiences flocked to the Addams Family tale “Wednesday,” the third-most-watched show in Netflix history, the company said. Murder mystery “Glass Onion” and British Royal Family documentary “Harry & Meghan” were also hits in the quarter.

Net income fell to $55 million or 12 cents per share from $607 million or $1.33 per share a year earlier. Revenue rose 1.9% to $7.85 billion, in line with expectations.

Hastings, 62, co-founded Netflix as a DVD-to-mail company in 1997, saying the idea came out of his frustration at returning a rental of ‘Apollo 13′ to the local Blockbuster video store and being shocked by a $40 late fee. .

“It feels like yesterday at our IPO. We were covered in red envelopes,” Hastings said Thursday in a post-earnings video interview.

The company evolved into a video streaming service in 2007 that rocked Hollywood, prompting Netflix’s media rivals to pour billions into their own services.

Some of Hastings’ challenges were self-inflicted, such as his plan to spin the company’s DVD business into a new company called Qwikster. That 2011 move cost the company 800,000 subscribers and sent shares plummeting.

The executive saw 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 drive growth, including an ad-supported version of the service.