Netflix announced a significant leadership change Thursday, appointing Ted Sarandos, the content chief, as its co-chief executive alongside Reed Hastings.
“I am excited to announce that we have appointed Ted Sarandos to be Netflix co-C.E.O. with me, and also elected him to our board of directors,” Mr. Hastings said in a statement. Mr. Sarandos, 55, will continue as head of content.
The change in many ways formalizes Mr. Sarandos’s role in the company. His compensation for the last few years has been equal to that of Mr. Hastings — each received about $30 million in compensation in 2019 — and he has often been the face of Netflix at public events. The move is also a signal of Netflix’s growing reliance on Hollywood.
Mr. Sarandos said he was originally skeptical of Netflix when he was approached to join the company 20 years ago, but agreed to come aboard because of the “persistence” of Mr. Hastings. “I’m excited and honored to have been appointed co-C.E.O. of Netflix,” he said in a statement.
The company that found success by mailing DVDs to subscribers in red envelopes as it took on the once-mighty Blockbuster had transformed itself into a streaming giant mainly by licensing old movies and shows.
In recent years, it has become one of the industry’s most prolific sources of film and TV production. Mr. Sarandos now moves easily within Hollywood’s circles of power, brokering big-budget projects with Martin Scorsese, Will Smith, Shonda Rhimes, Ryan Murphy, Sandra Bullock and Adam Sandler. In short, the company has become more dependent on Mr. Sarandos’s domain: original content.
Mr. Hastings will continue in his role (alongside Mr. Sarandos) and will remain chairman. “In terms of the day-to-day running of Netflix, I do not expect much to change,” Mr. Hastings said. He added that the leadership moves “are part of a long process of succession planning.”
In what appears to be a suggested timeline, Mr. Hastings said he was “committed to Netflix for the long term,” and added, “Here’s to the next decade.”
The streaming service reported a surge of 10.1 million new customers Thursday in its second-quarter results, extending the gains it made the first three months of the year, when the coronavirus pandemic prompted lockdowns across the globe.
The company had forecast the addition of 7.5 million subscribers, and Goldman Sachs predicted 12.5 million in a note last week. It’s likely the rapid growth is a result of more people choosing to subscribe to Netflix because of stay-at-home restrictions.
Indeed, the company expects a much weaker performance in the current quarter and forecast the addition of 2.5 million new subscribers. Investors sold off the stock on that prediction, sending Netflix shares down more than 10 percent in after-hours trading.
Netflix reported that it now has 192.95 million customers worldwide and about 66 million in the United States. That puts the service that much closer to the magical 300 million figure, a loose measure of where investors think Netflix could top out.
Netflix said its slate of new productions was on track last quarter, but that it could see a slowdown in releases for the current period. Blockbusters like “Extraction,” a thriller starring Chris Hemsworth that was released in April, drew in 99 million views in its first four weeks, the company said. Last week, Netflix debuted “The Old Guard,” a smart, humane action epic starring Charlize Theron. Fresh programming is crucial to Netflix’s growth because new shows tend to drive new subscriptions.
The company said it would release several new series and films later this quarter, including Season 2 of “The Umbrella Academy,” and “Enola Holmes,” a period mystery film with Millie Bobbie Brown, a star of the Netflix hit “Stranger Things,” playing the sister of Sherlock Holmes.
Netflix reported nearly $900 million in positive free cash flow this quarter, making it the second-consecutive period in which it had more cash come in the door than go out. Netflix now expects to keep its money for the year and could end up with positive free cash flow for all of 2020, meaning it will finally be profitable on a balance-sheet basis.