Reed Hastings Resigns as Netflix Membership Grows Again

By Justin Jones On Jan 20, 2023

Reed Hastings Resigns as Netflix Membership Grows Again, Netflix’s founder and CEO for the past quarter-century, has moved to the role of executive chairman. Greg Peters, who has been Netflix’s COO for the past three years and CPO for the past six, will join current co-CEO Ted Sarandos in running the streaming juggernaut.

After a tumultuous year that saw the introduction of advertisements, the company’s first subscriber losses in a decade, and the promise of a crackdown on password sharing, Netflix announced the transition on Thursday as it reported better-than-expected growth in the fourth quarter.

Netflix, the most popular streaming video service, reported a 7.66% rise in subscribers between October and December, bringing the number of Netflix users to 230.75 million. In October, Netflix projected that it would gain 4.5 million new customers. That’s more than the 4.57 million new subscribers that analysts had predicted. Recent expansion reversed Netflix’s historically bad first half of 2017 when the company lost a record number of subscribers.

In Friday morning trade, shares were up 5.9 percent to $334.29. By Thursday’s end, investors had lost over a third of their investment in Netflix over the past 12 months due to the company’s membership growth drama and broader economic concerns.

Hastings announced his resignation as CEO in a separate piece, explaining that he had been handing over managerial responsibilities to Sarandos and Peters for over two years.

Hastings described it as a “baptism by fire,”, especially in light of the company’s previous struggles with COVID. “However, they have handled things superbly, guaranteeing that Netflix keeps improving and laying out a strategy to reaccelerate our revenue and profit development. For this reason, the board and I agree that now is the time to implement my succession plan.”

Before this year, Hollywood’s leading media corporations were forced to accept streaming as the future of TV because of Netflix’s unstoppable membership growth. Apple TV Plus, Disney Plus, HBO Max, Peacock, and Paramount Plus are just some new services that have emerged due to the so-called streaming wars, in which major media companies invested billions of dollars each in their streaming operations.

The proliferation of streaming services increases the subscriptions you need (and the associated costs) to watch TV series and movies online. But it has also raised the bar for Netflix’s rivals, making it harder for the firm to attract new customers and hold on to existing ones. With so much riding on its success, Netflix has been forced to adopt tactics it had previously ignored or shunned. This year, the business will expand its password-sharing crackdown beyond the few Latin American areas where it is already testing account-sharing costs. It will also sell cheaper subscriptions financed by advertising, both of which were introduced in November.

Peters stated on Thursday that the rollout of the password fees will begin later in the first quarter and would take a couple of quarters to complete.

Netflix also reported that its ad-supported subscribers watch more than the firm had anticipated and are just as engaged as their ad-free counterparts.

Also, “as expected,” Netflix added in its report, “we’ve observed relatively little moving from other plans,” which means that it doesn’t expect many consumers to convert to the lower, ad-supported tier from a more expensive, ad-free tier.

Independent analyses have found the reverse to be true. According to research published earlier this week, almost all of Netflix’s ad-supported subscriptions in the first two months of the tier’s launch resulted from users trading down from the premium to the free service.

When asked if Netflix would consider offering a free tier supported by advertisements, Sarandos said the firm is “open to all kinds of revenue models” but has no immediate plans to implement one. Instead, the company is putting energy into promoting its paid “Basic with advertisements” plan and rolling out its new cost structure for joint user accounts. He remarked, “This year, we have a lot of responsibilities.”

Bela Bajaria, formerly head of worldwide TV at Netflix, has been promoted to chief content officer, which Sarandos earlier held. Scott Stuber has taken over as Netflix’s film head.

Netflix’s streaming audience in the United States and Canada increased by 910,000 in the last quarter, bringing the total to 74.3 million. Membership climbed by 3.2 million across Europe, the Middle East, and Africa, bringing the total to 76.73 million. With this increase, the total number of Latin American customers now stands at 41.7 million. Moreover, adding 1.8 million new members brought the total number of Asian and Pacific area users to 38.02 million.

Net income for Netflix was $55.3 million, or 12 cents per share, down from $607.4 million, or $1.33 per share, in the same period a year earlier. Earnings reached $7.852 billion, up 1.9% over the previous year.

Profit was expected to exceed expectations, with analysts projecting 45 cents per share in earnings compared to Netflix’s projection of 36 cents. A total of $7.848 billion was predicted as revenue by analysts.