defeated the hegemony of blockbusters, changed the business model of video stores, after cable television and, when OTT platforms became the majority, together they had an impact with the help of the pandemic on the film and linear television business itself. Surely the personal figure who contributed the most to all this, Reed Hastings, has announced that he is stepping down from the direction of Netflix.
He will step down as his co-CEO, a position he shared with Ted Sarandos, to a much less executive role of Chairman. Hastings has led Netflix since he founded it with Marc Randolph in 1997. 25 years are many, and his departure can be accused of being somewhat late.
It also comes with a complex context for Netflixwhich in 2022 has gone from a first semester where it suffered the first loss of subscribers of its modern era to introducing a new subscription with ads —something that Hastings had always denied— and presenting, in its latest results, a new promotion.
The new co-CEO position with Ted Sarandos will be held by Greg Peters, until now chief operating officer, who has overseen the development of its products and its foray into advertising.
Hastings has been giving signs that he will step aside for several years. He promoted Sarandos to co-CEO in 2020 and named Peters COO at the same time. He has already delegated almost all Hollywood decisions to Sarandos, gradually withdrawing from the day-to-day affairs of the company.
With the passing of the 62-year-old Hastings, an era is clearly coming to an end at Netflix, the red brand that greatly changed our relationship with entertainment today. Also, that of a different and controversial leader, with an approach to his way of understanding a great company that he left written in his book there are no rules here.
From changing video stores to changing TV
Hastings, trained as a computer engineer and who had made money after founding and selling the company Pure Software, founded Netflix in 1997 with Marc Randolph, another tech executive. Randolph was CEO of Netflix in its early years, but he proved he was better at starting a company than running a growing company. Hastings supplanted his co-founder as CEO and has been since then.
Hastings took the company public and led Netflix in its triumphant fight against the video rental chain Blockbuster, which at one point was on the verge of buying it. Amazon also took an interest in the then new company that sent DVDs by mail.
It was in 2007 when Hastings introduced the streaming service and four years later it spun off the streaming business from the DVD-by-mail service. That move turned out to be his biggest mistake at Netflix, as it led to a 60% price hike for his customers. It also gave the streaming service the unfortunate name of Qwikster.. The company lost 800,000 customers and its shares plummeted. Over time, that bifurcation of marks would be erased. And less bad.
But Hastings’ vision of the future was solid. Customers wanted to watch video-on-demand online. That same year, Sarandos decided to spend 100 million dollars to make two seasons of a series called house of cards. Sarandos, a pop culture encyclopedia, joined Netflix in 2000 from a regional video rental chain and had been trying to finance original programming for more than a decade.
house of cards It was a huge success and forever changed the trajectory of the company.. Netflix began spending billions of dollars a year on original programming, and Sarandos, Hastings’s longtime adjunct, came to be seen as his partner. Soon enough, his biggest providers began to see Netflix more as an enemy than a friend, and Sarandos became one of the most influential executives in Hollywood history.
A brilliant but unprofitable model
In recent years, Netflix has had to face increasing competition, which has caused many studios like Disney to remove their products of its offer to broadcast it through its own platforms. All this, in addition, surfing the growth that came with the pandemic and the subsequent fall that has led to the introduction of the option with ads. Years, yes, in which he has broken down the critical barrier that for a long time looked down on him and has won his first Oscars.
If something can be blamed on Hastings at this time, it is that after 25 years Netflix’s economic model remains unclear. The company is fundamentally unprofitable, living off games with the cash flow to finance its huge production of content, something that can now begin to change with the new management.
As part of the latest reorganization, Bela Bajaria will assume Sarandos’s former position as content director. Until now she held the position of global director of TV.
Peters’ promotion to co-CEO ensures that someone with a tech background continues to run a company born in Silicon Valley. Peters has overseen the company’s push toward advertising and its efforts to eliminate password sharing.
Towards a new Netflix
Sarandos and Peters must guide Netflix through turbulent times for the media industry. The company just announced its slowest year of subscriber growth since 2011, the year it spun off its streaming business from its DVD-by-mail service. The company’s shares lost half their value last year.
Netflix introduced ads in November, after years of positioning its service as an alternative to ad-supported TV. The performance of the advertising offer has been uneven, according to the first information.
It was Netflix’s least popular plan in its first month, according to Antenna, and advertisers say the service has had fewer viewers than the company anticipated. However, according to Ampere Analysis, the new tier generated a surge in new subscriptions on its first day and increased its share of subscriptions to Netflix in December.
Netflix says they are pleased with its progress and the fact that the ad strip has attracted new cost-sensitive customers. Most of the people who choose the advertising level are new customers, not people who have opted out of a more expensive plan. The company had nearly doubled the price of its most popular plan in the past decade.
While other media companies have suffered difficult leadership transitions in the past two years, Netflix executives ended their earnings call Thursday by thanking Hastings. He hastened to remind everyone: it’s not goodbye, it’s see you later. He still owns more than $1.6 billion in shares of the company.
And perhaps his departure will be for the better. Netflix now seems like a much more mature business, where tough decisions are made (like canceling 1899) or the bet on advertisements, something that Hastings, by himself, surely would have avoided. Ultimately, they are beginning to focus less on subscriber growth and more on revenue growth.
Yes indeed, His path here would surely have been very different and surely not as disruptive without Hastings.