Reed Hastings, one of Netflix’s founders, is giving up his co-CEO title and transitioning into the role of executive chairman.

The company announced the news in a letter to shareholders along with its Q4 earnings on Thursday.

Hastings spent 25 years building Netflix into the streaming giant it is today, transitioning it from a DVD mail service into a global powerhouse. Greg Peters, Netflix’s chief product and COO, will be the next co-CEO, joining Ted Sarandos, who has been in the role since 2020.

“In the last two and a half years, I’ve increasingly delegated the management of Netflix to them,” Hastings said in a statement, referring to Sarandos and Peters. “It was a baptism by fire, given Covid and recent challenges within our business.”

Hastings said that both Sarandos and Peters “managed incredibly well” throughout the pandemic, and he and the board believe it’s the right time to complete a succession plan that’s been in the works for several years.

The passing of the baton is effective immediately, with Hastings pointing to executives like Bill Gates and Jeff Bezos as other company founders who moved into chairman roles.

“We start 2023 with renewed momentum as a company and a clear path to reaccelerate our growth,” Hastings said.

Sarandos honored Hastings in a statement, noting both he and Peters learned “intellectual rigor, honesty and willingness to take big bets” from the former co-CEO, and the pair look forward to working with him “for many more years to come.”

In addition to the Hastings news, Netflix also upped Bela Bajaria to chief content officer from her current role as global head of television and named Scott Stuber—current head of film—the chairman of Netflix Film, a newly created position.

In other news

Besides a changing of the guard, the streamer also announced its fourth-quarter earnings, adding 7.66 million subscribers in its first quarter since adding ads.

The number blows past the company’s expectations of 4.5 million additions, bringing Netflix’s total to 230.75 million global paying customers, an outlook it believes points to a strong 2023.

After acknowledging that 2022 was a “tough year,” the letter to shareholders notes, “We believe we have a clear path to reaccelerate our revenue growth: continuing to improve all aspects of Netflix, launching paid sharing and building our ads offering.”

The company started the first half of 2022 by losing more than a million subscribers but snapped that streak to add 2.4 million customers in the third quarter.

Netflix didn’t provide guidance for subscriber additions for 2023, which is in line with the announcement it made last quarter as it pivots its focus to growing revenue. In terms of revenue, the company expects an increase of 4% in the second quarter and saw a year-over-year revenue increase of 2% in the fourth quarter, generating about $7.85 billion.

However, that number accounts for only $55 million in profit, a 90% year-over-year decline.

Adding ads

Netflix launched its ad-supported tier, Netflix Basic with Ads, in November, which was just six months after the company announced its advertising plan—something Hastings had adamantly opposed for years.

“We believe branded television advertising is a substantial long-term incremental revenue and profit opportunity for Netflix, and our ability to stand up this business in six months underscores our commitment both to give members more choice and to reaccelerate our growth,” the letter reads.

The company has seen “very little” switching from other plans to the ad-supported tier, in line with expectations, and that reaction from consumers and advertisers has confirmed its model going forward. However, the company expects the impact in 2023 will be “modest.”

Earlier this week, Netflix expanded its partnership with Nielsen to cover linear and streaming data across the U.S., Mexico and Poland and will add Digital Ad Ratings in the first half of 2023.

The company’s letter acknowledged that it’s still “early days” for ads, adding that it will work on improving targeting and measurement.

Seasoned content

As streaming competition continues to increase, Netflix had five of its top 10 most popular English-language seasons ever in 2022, helmed by Stranger Things 4 and newcomer Wednesday, which both surpassed one billion hours viewed.

Other major titles included Monster: The Jeffrey Dahmer Story, Season 2 of Bridgerton, Inventing Anna and Harry & Meghan, the company’s second most successful documentary series ever.

“Generating conversation is our primary marketing goal because we see that it drives acquisition and encourages existing members to watch more, which in turn helps with retention,” the letter reads.

Paid sharing is coming

To the chagrin of password sharers everywhere, paid sharing is on the way. Netflix previously said that account sharing affects over 100 million households and is working to crack down on it, testing in South America last year.

Later in the first quarter, Netflix plans to roll out paid sharing more broadly, which will limit the use of Netflix to a singular household. It will allow members to review which devices are using accounts and transfer profiles to new accounts.

In some countries, members will have the option to pay extra if they want to share Netflix with people they don’t live with.

“As is the case today, all members will be able to watch while traveling, whether on a TV or mobile device,” Netflix said in the letter, adding that it expects some streamers to stop watching, which could impact near-term engagement.