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In a letter to shareholders on Thursday, Netflix made official what had long been an informal reality: Chief content officer Ted Sarandos would also be co-CEO of the streaming behemoth.
Sarandos, a 20-year veteran of Netflix who pushed the company into original programming, will serve alongside existing CEO and cofounder Reed Hastings. Hastings, an engineer by training, is the Silicon Valley brain of an operation that has successfully merged algorithmic technology with a Hollywood content machine. While many assumed Sarandos would soon succeed Hastings outright, Hastings isn’t going anywhere—and he made as much clear in a call with investors later on Thursday. “To be totally clear, I’m in for a decade,” he said.
The anointment of a co-CEO isn’t about Hastings imminently leaving (though he did add that the move, alongside the promotion of chief product officer Greg Peters to chief operating officer, is “part of a long process of succession planning”). Nor is it about any failings of Hastings own leadership—Netflix is one of the most successful businesses of the modern age, and Hastings gets much credit from his peers for that. Rather, it underlines just how instrumental Sarandos has been in that success. And from a big picture perspective, it highlights the increasing shift from Netflix’s center of influence in Silicon Valley to the creative sphere of Hollywood.
Netflix’s market capitalization tops even that of Walt Disney, with a value of $230 billion compared with the legendary media conglomerate’s $218 billion. Sarandos’s 2012 gamble on the Norwegian crime dramedy Lilyhammer—and subsequently the megahit House of Cards—is a big reason why. It set Netflix on a path to become arguably the most dominant production house in show business, this past year earning the company more Academy Award nominations than any other studio. It’s accomplished the same feat with television’s Emmys. Sarandos also pioneered Netflix’s business model of purchasing multiple seasons from creators rather than ordering pilots first.
“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. “It was typical of his ability to see where the industry—and consumer tastes—are headed. He’s built an extraordinary team, attracting some of the most creative and best entertainment executives from all around the world.”
Gene Munster, managing partner at venture capital firm Loup Ventures, said the elevation of Sarandos to co-CEO alongside Hastings is a sign that Netflix will stay the course in terms of its direction. “Given the two have worked together for decades, the announcement is not a surprise and likely means little will change with the company’s strategy given [Sarandos] has been instrumental in building value over the past decade,” he said.
Sarandos will have his challenges. While Netflix once again topped expectations for its second quarter with 10 million new subscribers, the company also cautioned that growth would stall in the second half of the year as the initial shock of the coronavirus pandemic—which had lifted subscriptions—wore off. The guidance prompted its shares to plummet 10% in after-hours trading on Thursday following the earnings report. Sarandos and Hastings will also have to navigate an increasingly crowded streaming market with the additions of WarnerMedia’s HBO Max and NBCUniversal’s Peacock, alongside existing competition like Disney+ and Hulu.
Sarandos, 55, didn’t want to be a part of Netflix at first. A former video distributor executive, Sarandos was skeptical of Netflix’s business model—then focused on DVDs—and how it could compete with Blockbuster. “Part of Reed’s brilliance is his persistence, and so I eventually said yes, back in 1999,” Sarandos said in a statement.
Despite the early reluctance, Sarandos has been more public facing than his co–chief executive for some time. To some casual observers, he might have come off as the CEO already. While Hastings mostly stays out of the public eye, Sarandos frequents industry events, making connections with talent and their representatives with typical Hollywood flair.
Above all, Sarandos attributes his rise to co-CEO to his voracious appetite for movies and television. In his statement, he tells a story of his childhood in Phoenix, where his mother “always insisted on having cable TV and a little dish to get HBO” even if the family was struggling to pay phone or gas bills. In adolescence, he worked at a local video store to pay the costs of school tuition. “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,” he said.
“My journey to co-CEO of Netflix has been as a fan of great entertainment,” Sarandos added. “And that’s my commitment to Netflix members going forward: to keep pushing the boundaries of what a consumer-first company can achieve for people who love stories.”