Two surprising things happened yesterday at Netflix yesterday.
First, the company announced better-than-widely-expected Q4 results, saying that it added 7.66 million net new subscribers during the period, far more than the 4.5 million it had projected. It ended the year with 230.75 million worldwide, well beyond its target of 227.59 million – a four percent jump year over year.
Second, co-founder Reed Hastings stepped down from his co-CEO role, and now will serve solely as executive chairman. Netflix co-CEO Ted Sarandos now will share the job with the company’s current COO, Greg Peters.
Axios writes that “the executive shakeup comes as Netflix moves to diversify its business from being fully reliant on ad-free subscriptions. The company has introduced a new subscription advertising tier and has pushed to build up its gaming and merchandising businesses.”
The New York Times writes: “Netflix said its advertising-supported subscription had resulted in subscriber growth and increased customer engagement. The company said that relatively few of its customers had switched from other plans, and that both customers and advertisers had been bullish on the option.
“Netflix did not provide any guidance for new subscriber additions in the first quarter of 2023, after an announcement last year that it would stop providing those closely watched updates to investors.”
And Variety writes that “Hastings, in a blog post, said Netflix’s board has been discussing succession planning for several years. As part of that, in July 2020, the company promoted Sarandos to co-CEO alongside Hastings and also appointed Peters to the role of chief operating officer in addition to chief product officer.
“Over the last two and a half years, according to Hastings, ‘I’ve increasingly delegated the management of Netflix’ to Sarandos and Peters. He continued, ‘It was a baptism by fire, given COVID and recent challenges within our business. 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’.”
KC’s View:
And, if it doesn’t work out, Hastings always can follow in the footsteps of Howard Schultz and Bob Iger and Howard Schultz (again) and take the CEO job back.
But let’s be serious. Despite recent problems at Netflix and some missteps along the way, Hastings has been instrumental as a disrupter, essentially putting a myopic and complacent Blockbuster out of business, and, more recently, helping to create an environment in which movie theaters seem to be less relevant every day.
It is not a coincidence, I think, that Regal Cinemas has in the last 24 hours announced the closure of more than three dozen of its locations, including flagship downtown multiplexes in New York City and Seattle. This is a result of its parent company, Cineworld, filing for Chapter 11 bankruptcy protection in the U.S. last September due to nearly $5 billion in debt.
I still think that Netflix needs to do a better job with its proprietary content/private label movies – it often seems more focused on quantity than quality, and more dependent on directors than screenwriters. But make no mistake – Hastings has created an enormously effective entertainment engine with what in show business they call “legs.” And the trailer Netflix put out for 2023 is just one indication:
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