Behind Reed Hastings’s Step Back as Netflix Co-C.E.O.

A streaming pioneer steps back

For 25 years, Reed Hastings was not only Netflix’s co-founder, but also its most visible cheerleader and advocate. Yesterday he announced that he would relinquish his co-C.E.O. title to a top deputy and become executive chairman.

The change comes as the streaming giant grapples with one of the most challenging moments in its history: Competitors are coming on strong, and Wall Street is keeping a close eye on its bottom line.

Mr. Hastings’s move had long been in the works. “Our board has been discussing succession planning for many years,” he wrote in a corporate blog post, comparing the move to the changing of the guard at other tech companies — think Jeff Bezos at Amazon last year, or Bill Gates at Microsoft — to give way to the next generation of leadership. (It’s hard not to compare the relative smoothness of this transition to, say, that of a key Netflix rival, Disney.)

Who’s stepping up? Picking up the co-C.E.O. role is Greg Peters, an architect of Netflix’s much-anticipated ad-supported subscription offering, who’ll share the title with the longtime Hastings lieutenant Ted Sarandos. (Setting tongues wagging in Hollywood was the additional news that Bela Bajarian, the company’s head of television who was recently profiled in The New Yorker, was promoted to chief content officer.)

Does Mr. Hastings’s move signal anything about Netflix’s prospects? Over the past year, the company has sought to reassure investors about a number of issues, including:

• Slowing subscriber growth, plus an actual drop in subscriber numbers last year, which drove a sharp slide in its stock.

• Advances by rivals like Disney and Amazon, a tough thing to swallow for a company that regularly says its main competition includes sleep.

• Its own multibillion-dollar debt-financed binging on content production, without a clear sense of the return on that investment.

Those challenges prompted Mr. Hastings, who said he had been largely delegating day-to-day management over the past two-and-a-half years, to become more hands-on again. (His reasserted presence was also seen as important as Netflix began taking steps it had long dismissed as unnecessary, like launching the cheaper, ad-supported service and cracking down on password sharing.) Recode’s Peter Kafka surmises that Mr. Hastings’s willingness to change roles might mean he believes Netflix has put the worst behind it. And investors sent shares higher in premarket trading.

Of course, it helped that Netflix had good financial news to report alongside its leadership transition, including better-than-expected subscriber and revenue growth. The question now is whether Netflix is truly in the clear, and whether Mr. Hastings will truly step back as Bezos has thus far — or find that he has to reassert himself again.

HERE’S WHAT’S HAPPENING

Google’s parent company will cut 12,000 jobs. Alphabet announced the layoffs, amounting to 6 percent of its work force, this morning. The move puts Alphabet alongside Meta, Microsoft, Salesforce and other Silicon Valley titans in turning to job cuts to grapple with a slowdown in digital advertising and the economy more broadly.

The U.S. begins “extraordinary measures” to avert default. As the country hit the debt ceiling yesterday, the Treasury Department began moving money around to ensure the government can meet its financial obligations and avoid economic disruption or a default. Expect a long slog to end the standoff.

The crypto lender Genesis files for bankruptcy. The embattled company sought Chapter 11 after struggling in the wake of FTX’s collapse. It’s the latest blow to Genesis’s parent company, Digital Currency Group; another part of the crypto conglomerate, the industry publication CoinDesk, has hired Lazard to help it explore a sale.

A fat-fingered computer error is to blame for the F.A.A.’s computer outage. The federal airline regulator said that a government contractor who inadvertently deleted crucial files — and not a malicious hacker — caused last week’s system failure that grounded all flights into, within and out of the U.S. for hours.

Rupert Murdoch testifies in a defamation lawsuit against Fox News. The media mogul began a two-day deposition yesterday over his network’s coverage of unfounded allegations of vote-rigging in the 2020 presidential election. Dominion Voting Systems, which brought the lawsuit, is seeking $1.6 billion in damages.

A top prosecutor flips

Companies that once hoped to avoid Karl Racine, the former attorney general of the District of Columbia who was known for taking on corporate giants like Amazon, Facebook and Google, might soon be seeking him out. Mr. Racine joined the law firm Hogan Lovells this week to lead a practice for clients dealing with state-led campaigns over everything from consumer rights and antitrust to environmental, social and corporate governance, or E.S.G., initiatives.

Mr. Racine spoke with DealBook about expected developments. The interview has been edited and condensed for clarity.

What’s next in the E.S.G. wars?

We’ve seen governors and treasurers go out and seek to pull money out of certain pension funds because they claim that investment managers are using E.S.G. inappropriately. Well, one can foresee that beneficiaries — having seen the record of returns of the investment managers who are being penalized for using E.S.G. — could organize and tell those states to keep politics out of the investment world.

Can businesses push back?

The Kentucky Bankers Association recently sued the attorney general there to enjoin his investigation into financial institutions’ use of E.S.G. That is significant litigation, and I think that you’re gonna see more and more of this.

What else are you watching?

The area of covenants not to compete is very striking and important, and we saw the F.T.C. move into that arena pretty broadly. The noncompete historically has been used to really restrict and limit hourly wage workers just working to make ends meet. Once you start banning noncompetes all across the board, you’ve got to be really attentive as to what the impacts are and why companies devote time, energy and resources to recruiting and training and promoting people.

What big theme do you see emerging in 2023?

The whole idea of government increasingly playing a role in business and the politicization of how businesses choose to operate. I think you’re going to see a lot around that subject matter, namely about government intrusion into the workings of business.

“Everything is on the table. If there is a path forward on that, then we will not only explore that, we’ll do it.”

— John Ray III, the new C.E.O. of FTX, on the possibility of resuming operations at the bankrupt crypto trading exchange’s main international business unit.

Spot the “snow leopards”

What are the current trends that could change the future? Nassim Nicholas Taleb popularized the idea that the most consequential “black swan” events are often unpredictable. The Atlantic Council, a think tank, uses the term “snow leopards” to describe phenomena that could change the course of history, but that most of us may miss. DealBook got a first look at its list for this year.

• A push to regulate algorithms is gathering pace. They influence what we see online, direct us on GPS and drive advances in machine learning and artificial intelligence. Governments are increasingly calling for stricter rules to rein in algorithms and make creators liable for any harm they cause, but expect Big Tech to push back.

• Battery tech could democratize EV ownership. Electric vehicles could become cheaper and more efficient thanks to a shift in how battery tech is used. Structural batteries built into a car’s frame can reduce weight, improve its range and cut production costs.

• Geoengineering may have unintended consequences. China and the United Arab Emirates are “seeding” clouds, and India and the U.S. are making advances in geoengineering, interventions in the environment to mitigate climate change. But the projects could also alter regional weather patterns, and there’s a danger that some countries may act unilaterally before the effects are well understood.

• Pre-emptive corporate decoupling from China may accelerate. As tensions between the West and China escalate, wary corporations that fled Russia last year may shift away from China before they’re forced to do so. Notably, Apple is reportedly trying to shift some iPhone production to India, and Alphabet might move some Google Pixel phone manufacturing to Vietnam.

• Two key U.S. allies could reconcile and shake up the Indo-Pacific. Japan and South Korea have been at loggerheads for years over grievances that date back to World War II. But there are signs that the neighbors — which each host tens of thousands of American troops — could overcome their differences, a move that would bolster the U.S.’s efforts to present a united front against a more assertive China, North Korea and Russia.

• Platform workers are organizing worldwide. Non-contract workers who provide delivery, driving and other services through online platforms are fighting for better conditions and pay, with strikes and protests in Brazil, Britain and the Philippines an indication of a rising movement. Those efforts could lead to more government protections for many in the informal economy.

What do you think? Are there any snow leopards that they’ve missed? Email us at [email protected].

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