Netflix gets a co-chief exec
Content officer is promoted as revenue soars during shutdowns
‘Ted drove the revolution in our content strategy, which was way ahead of its time and has been key to our continued success.’
— Reed Hastings, co-CEO of Netflix
Netflix Chief Content Officer Ted Sarandos got a big promotion Thursday to co-CEO as the Los Gatos, Calif., streaming giant continues to rack up subscribers during the pandemic.
The company added 10 million subscribers, beating analyst estimates of 8.2 million and underscoring the company’s rapid growth during the coronavirus crisis, which has caused a surge in home viewing. Netf lix now has nearly 193 million subscribers globally.
Sarandos, who will also retain his chief content officer title, had long been expected to succeed Reed Hastings as CEO.
He has overseen content operations since 2000 and was pivotal in the company’s transition from a DVD rental business to a massively popular streaming hub with a raft of original productions such as “House of Cards” and “Orange Is the New Black.”
Hastings described the promotion as part of succession planning and said that it would not change the dayto-day running of the company.
“While I saw streaming coming and pushed for it, Ted drove the revolution in our content strategy, which was way ahead of its time and has been key to our continued success,” Hastings said in a statement.
Sarandos will share the CEO title with Hastings and will also retain a board seat.
Greg Peters, Netflix’s chief product officer, will also become chief operating officer.
“Watching films and TV all day, and hearing what customers liked, helped me understand people’s dramatically different tastes and moods as well as the value of a good recommendation,” Sarandos said in a statement.
Netflix’s revenue rose 25% to $6.1 billion in the second quarter compared with a year earlier. Net income increased to $720 million, up from $271 million a year earlier. Netflix beat analysts’ estimates on sales but missed on earnings. Analysts surveyed by FactSet expected $6.08 billion in revenue and $823 million in net income.
“With movie theaters closed and major sports seasons postponed, streaming video has been a notable bright spot in the media industry,” said Eric Haggstrom, a forecasting analyst at research firm EMarketer. “Netflix continues to lead the industry, both in the U.S. and internationally.”
Netflix’s stock price has risen nearly 60% since the start of the year as it has achieved record subscriber growth. Analysts said they will be watching whether Netflix can retain subscribers after the pandemic.
The stock closed at $527.39 a share Thursday, up 0.8%. In after-hours trading, the stock declined 9%.
“We simply feel that Netflix’s current valuation overshoots its long-term ... potential especially as competition becomes more robust,” wrote Matthew Harrigan, an equity research analyst at Benchmark Co. Harrigan has a sell rating on the stock.
Netflix faces more competition in the marketplace from a slew of subscription streaming services that include Disney+, HBO Max and most recently, NBC Universal’s Peacock.
In a letter to shareholders, Netflix said it is expecting that the number of new subscribers in the third quarter will be down year over year. Netflix is forecasting 2.5 million additional paid subscribers in the third quarter, compared with 6.8 million during the same period last year.
Still, some analysts remain bullish on Netflix.
With no immediate vaccine, prospects for widely reopening theaters, theme parks and other entertainment venues remain elusive. This week, Gov. Gavin Newsom ordered the closure of indoor dining, bars, museums and movie theaters statewide and ordered the hardest-hit counties to close additional venues such as indoor gyms, places of worship, hair salons, nail salons and malls.
The pandemic has also affected Hollywood productions, causing location shoots in the L.A. region to fall 98% in the second quarter compared with a year earlier. Live events have also been canceled, including Netflix’s comedy festival that was scheduled for this year.
The company said that its 2020 slate of series and films largely has been shot and that, despite delays, it will still have a higher number of original productions for 2021.
During the shutdown, Netflix has been filming in such countries as Iceland and South Korea and is resuming productions in other parts of the world.
“The pandemic and pauses in production are impacting our competitors and suppliers similarly,” Netflix said in its note to shareholders.
Netf lix doesn’t broadcast live sports or rely on live events or advertising, a significant advantage during the pandemic, Haggstrom said. His firm estimates that 33% of people who pay to stream shows and films over the internet are Netflix viewers.
“Netflix will weather this crisis better than almost everyone else in the media industry,” he said.