After more than 25 years with the company he co-founded, Netflix, Reed Hastings has decided to step down as co-chief executive.
His remarks coincided with Netflix’s December 31 announcement of a significant increase in subscription numbers.
People were predicted to reduce their use of streaming services as a result of the tightening economy.
However, Netflix defied the trend by gaining over seven million new members, far higher than industry experts predicted.
The news about Harry and Meghan, the Addams Family spin-off premiere on Wednesday, and the movie Glass Onion all did well at the box office.
The business said in a statement, “2022 was a trying year, with a rough start but a brighter finish.”
Mr. Hastings’s anticipated departure implies that Netflix will enter an already crowded industry and face future obstacles, but with 231 million subscribers worldwide, he will leave the company in good shape.
Mr. Hastings, widely regarded as an innovator in the streaming industry and one of the first disruptors in the technology sector, will continue in his role as executive chairman.
Greg Peters and Ted Sarandos, who were already top executives, will now control the company.
According to Third Bridge analyst Jamie Lumley, Reed Hastings’s departure from his current job “raises a lot of doubts about Netflix’s future strategy.”
To paraphrase one source, “Incoming Co-CEO Greg Peters will have a variety of big decisions to make, from managing high levels of costs to password sharing and unlocking the code to find the next Stranger Things.”
Total subscribers increased by 7.66 million in the final three months of 2022, exceeding the company’s projected gain of about 4.5 million.
For Wedbush Securities’ Alicia Reese, retention of Netflix members can be attributed to two factors.
The first is that Netflix offers a free ad-supported tier to anyone who wants to cancel or pause their membership, and the second is that viewing trends suggest that people are more likely to stick with popular shows.
She attributed the low “churn” rate to both of those causes.
Fourth-quarter sales increased to $7.9 billion (£6.37 billion). However, earnings for the quarter and the year were down from the corresponding periods a year earlier and from 2021. Ms. Reese said that despite this, Netflix was still “ahead of its competitors” in terms of profitability.
As 2022 began, Netflix had a steep uphill climb. The competition from companies like Amazon, HBO, Apple TV, and Disney was getting tougher. The company was forced to raise customer prices to cover inflation despite laying off hundreds of employees.
The company’s subscriber count took a hit because of that in the first half of the year.
It announced in November that it would be less tolerant of password sharing in the future and provide a cheaper ad-supported option in 12 countries, including most of Europe, the UK, and the US. Netflix has expressed satisfaction with the service thus far.
Since the new ad-funded service was first launched in November, most of the additional subscribers in the final three months of 2022 would be paying the total price, according to PP Foresight’s Paolo Pescatore.
The upcoming year would be challenging for Netflix, he warned, as a “substantial slowdown” in the ad business was anticipated.
All media organizations, he said, will have to deal with uncertainties in the coming year, so “the year ahead is unlikely to be easy sailing.”
After falling roughly 38% over the previous year, Netflix shares surged in after-hours trade after announcing positive results.
Netflix began in 1997 as a DVD mail-order service. Customers placed orders online, and DVDs were shipped directly to their homes.
Mr. Hastings has stated that he owed a significant fine for failing to return a video cassette to the video rental store Blockbuster, which inspired him to think that a model more akin to a gym membership, with a monthly subscription for renting films, would be better.
Marc Randolph, his co-founder, reportedly denied this, saying instead that they only wanted to mimic Amazon.