Netflix co-founder Hastings exits as streaming company seeks new growth

Netflix is heading into a pivotal stretch without the executive who helped build it from scratch, as Chairman Reed Hastings prepares to leave the streaming company he co-founded 29 years ago.

Hastings, 65, is stepping away at a difficult moment for the business. Netflix is trying to unlock new growth as sales come under pressure from intensifying competition, while a potentially transformative merger with Warner Bros Discovery collapsed in February.

Late yesterday, Netflix projected current-quarter earnings per share below analysts’ expectations and forecast quarterly revenue growth that would be the weakest in a year, according to LSEG.

Investors reacted swiftly, sending Netflix shares down about 9% after news of Hastings’ exit.

Reed Hastings co-founded Netflix 29 years ago

Greg Peters, the company’s co-chief executive, said Netflix finished last year with more than 325 million paid members and now reaches an audience nearing one billion people.

“But even given that number, we still have plenty of room to grow into our addressable market,” he said.

In a letter to investors, Netflix said Hastings will not seek re-election at the company’s annual meeting in June and intends to turn his attention to philanthropy and other pursuits.

Over nearly three decades, Hastings oversaw Netflix’s evolution from a DVD-by-post service into a global streaming powerhouse that reshaped how films and television shows are distributed.

He also guided the company through setbacks, including the ill-fated 2011 plan to split off the DVD business into a separate service called Qwikster. Later, he helped steer Netflix through the pandemic, when the company enjoyed a burst of growth even as other entertainment groups faltered.

Hastings also helped define Netflix’s distinctive performance culture during a period of turmoil, when financing for internet startups had evaporated and he was forced to cut one-third of the workforce.

That decision to keep only the “keepers” triggered a jump in productivity and helped form the basis of the Netflix Way, Hastings wrote in his book, “No Rules Rules.”

“My real contribution at Netflix wasn’t a single decision,” Hastings wrote yesterday, but rather, “building a company that others could inherit and improve.”

Netflix Co-CEO Ted Sarandos praised Hastings’ leadership and said he had always aimed to create a company built to endure beyond its founder.

“He built a company of risk-takers and a culture where character matters, and nobody rests in the pursuit of excellence,” said Sarandos. “I have loved working with and for Reed through amazing twists and turns in our business, and he has modeled what it is to be a leader and a friend.”

Richard Greenfield, a media analyst at LightShed Partners, said “the departure of Reed Hastings has spooked investors.”

Warner Bros termination fee boost

Netflix did not say how it intends to use the $2.8 billion termination fee it collected after missing out on Warner Bros movie studio and HBO, but it raised first-quarter earnings per share to $1.23, up from 66 cents a year earlier.

Revenue climbed 16% from the same period last year to $12.25 billion, slightly ahead of analyst estimates of $12.18 billion.

Long maintaining that a Warner Bros deal was a “nice to have, not need to have” move, Netflix instead pointed investors toward other potential sources of growth.

The company said its push to broaden its entertainment lineup with video podcasts and live events, including the World Baseball Classic in Japan, is driving engagement.

Netflix also said it will lean on technology to improve the user experience and strengthen monetisation, with advertising revenue still on course to hit $3 billion in 2026, double the level of a year ago.