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Netflix adds 7.7M subscribers, beats forecast; CEO Reed Hastings steps down

Netflix founder and CEO Reed Hastings. (Manu Fernandez/AP)

Netflix added 7.7 million new subscribers in the fourth quarter of 2022, beating forecasts and boosting its shares in after-hours trading.

The streaming giant also announced that founder Reed Hastings will step aside as co-CEO and move to the position of executive chairman. Chief operating officer Greg Peters will be promoted to co-CEO, alongside Ted Sarandos.

In a letter to shareholders released Thursday, Netflix said the new subscribers were well over its forecast of 4.5 million. The growth was largely driven by the success of content added in the fourth quarter. TV series “Wednesday,” an Addams Family spinoff, was the company’s “third most popular series ever,” while documentary “Harry & Meghan” was a hit with audiences.

Netflix now has 231 million paid subscribers worldwide. The statement said that “2022 was a tough year, with a bumpy start but a brighter finish,” in reference to first three months of last year, when it lost 200,000 subscribers.

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The company is beginning 2023 with “renewed momentum and a clear path to reaccelerate our growth,” Hastings said in a statement.

He said that, as executive chairman, he will be a bridge between the new leadership and the board, and focus on Netflix stock’s performance. He also planned to spend more time on philanthropic activities.

Netflix promoted its head of global TV, Bela Bajaria, to chief content officer. Scott Stuber will be the new chairman of Netflix Film.

Netflix shares rose by more than 7 percent to $338.27 in after-hours trading Thursday. Last year, the company saw more than a third of its value wiped out after a poor showing in the first quarter. It generated $32 billion in revenue in 2022.

Last year, in a significant reversal of its ad-free policy, Netflix launched a cheaper, ad-supported plan in 12 countries. While it did not disclose the numbers, the company said it was pleased with the progress. “Engagement, which is consistent with members on comparable ad-free plans, is better than what we had expected,” it said.

The future, however, remains challenging for the company. Competition in the streaming segment has intensified beyond direct competitors, with options for audiences expanding to YouTube, TikTok and gaming.

With an eye on emerging markets, Netflix has been taking bold risks on gaming. It turned its hit “Stranger Things” into a game and has made shows based on popular video games such as “League of Legends.”

Peters, the new co-CEO, said in an earnings call that the company needs to “take the core model” of its operations and “just execute it better in all directions,” in reference to its gaming strategy.

“We’re planting some seeds that, if we execute well — and we’re excited about the progress we’re seeing so far — will represent the future potential for us in terms of growth and more profit opportunities,” he said.

However, the company was not pivoting from its legacy business model, he said.

Netflix’s 2023 film slate, released Wednesday, includes a rom-com featuring Reese Witherspoon and Ashton Kutcher, an action thriller starring Jennifer Lopez as an assassin, and a sequel to “Murder Mystery,” starring Adam Sandler and Jennifer Aniston.