At first, Peters attempted to simply replicate Netflix’s US programming strategy: He commissioned high-end scripted fare that was more expensive than the average Japanese TV show. In retrospect, Peters says, Netflix would’ve had more success licensing popular local shows to help introduce the brand to the public.
A couple of years into Peters’ time in Tokyo, Hastings called him and asked what he had planned that weekend—Hastings wanted to fly in the next day to speak with him. For a moment, Peters wondered if he was getting fired. Instead, Hastings asked him to become Netflix’s chief product officer. Peters’ tenure in Japan was seen as a bust by most at Netflix, but Hastings remained confident that Peters had successfully tackled a new challenge. “We didn’t second-guess ourselves by saying, ‘Maybe if we had a better GM,’” Hastings says. In 2017 he fired Hunt and put Peters in charge of product. Japan is now one of Netflix’s largest markets in Asia.
It wasn’t long after returning from Japan that Peters started to examine password sharing. The company didn’t regard it as a problem, all but encouraging users to game the system. It was still adding tens of millions of customers a year and figured any additional viewers amounted to free marketing. Peters knew it would eventually become a problem. As Netflix got bigger, it would become harder to attract as many new customers. He tested ways of cracking down on sharing, starting with the most egregious abusers. The company emailed them to say it was aware of their behavior and asked them to stop. If they didn’t, Netflix would shut down their account. This initial outreach was modest in scope. Netflix didn’t yet think password sharing was an urgent issue, and the company was worried about how customers would respond.
That tolerance for moochers started to change in fall 2021. The early days of the pandemic had been a boon to the company; around the globe, it added more than 165,000 customers a day in the first three months of 2020. Yet growth slowed in the second half of the year and remained sluggish throughout 2021. Netflix was reaching the upper limits of its potential audience in the US, where the streaming service already had more than 60 million customers and an additional 30 million or so were using someone else’s account. Cable TV had peaked at about 100 million households in the US; Netflix didn’t have much room to grow.
Home screen of Netflix’s mobile app.Photographer: Timon Schneider/Alamy
While everyone at the company agreed it had to crack down on password sharing, the question was how. It was easy to spot egregious cases, but the practice takes many forms. Some people share their account with partners or children they live with. That’s seen as legitimate. Some share their account with a friend or relative who lives in another place. That’s more problematic (and widespread). And then there are folks sharing passwords with dozens of people, often reselling accounts to those who can’t or don’t want to pay via traditional means. The company built a computer model to differentiate between someone traveling in another country and someone using their cousin’s account.
Once the company identified who was sharing an account, it had to figure out how to make the freeloaders pay. This debate became one of the most heated in the history of Netflix. On one side was Hastings, the company’s longtime leader. He thought Netflix should charge by the residence, like cable did. That meant people would pay per home and need another account for anywhere else. On the other side was most of Hastings’ executive team. Peters thought the residence model violated a central tenet of Netflix: If you paid for it, you could take it with you. He proposed a model based on the individual user. A customer could access Netflix wherever they went, and people who wanted to add users to their accounts would need to pay a fee.
Hastings can be stubborn, rooted in self-confidence from three decades of success (and a net worth of about $6 billion). But he agreed to test both plans. In 2022, Netflix rolled out the user model in Chile, Costa Rica and Peru and the residence model in five other Latin American countries. Password sharing was most widespread in the region, and it’s long served as an ideal testing ground: Most countries speak Spanish and present similar challenges around payments because many people don’t have bank accounts. The tests were unambiguous. Peters’ approach—the model based on the user, not the home—led to more sign-ups, fewer cancellations and less online outrage. “Greg got it right,” Hastings says. (Netflix’s crackdown on password sharing has been so successful that Disney and Warner Bros. Discovery Inc. are planning to do the same later this year.)
By this point, Hastings had been thinking about succession for some time. He and his board would talk about it several times a year, well before retirement was a consideration, and Hastings had kept a list of 10 to 15 employees he wanted to position for senior roles. He regularly invited board members to meetings with his direct reports so they could be more familiar with leadership. The board had already promoted Sarandos to become co-CEO in July 2020—a recognition that he already oversaw the company’s Hollywood operation (and thus most of its budget), but also a test of the co-CEO model. At the same time, Hastings had promoted Peters to chief operating officer, giving him a broader portfolio as well.
Few companies employ two CEOs, and from the outside, Peters and Sarandos appear to be an odd couple. Peters strives for efficiency; he tries to limit one-on-one meetings with colleagues to a half-hour. Sarandos is a schmoozer who pals around on weekends with his celebrity friends. And Peters, despite his mild-mannered exterior, is one of the most competitive people at Netflix. During company off-sites with top executives, Peters has turned friendly games of Family Feud or Iron Chef into blood sports. (Some have even accused him of cheating, an accusation he “categorically” rejects.) Yet Hastings and Sarandos were also an unlikely pairing, and their partnership built a roughly $260 billion entertainment giant. Netflix has long defied convention by fusing Hollywood and Silicon Valley. Hastings was confident that Sarandos and Peters would put the company’s needs first. In January 2023, Netflix announced Hastings would transition into a role as executive chairman and promoted Peters to co-CEO. Sarandos says that his relationship with Peters is “surprisingly high functioning” and that they’ve “found a really interesting groove.”
Andre Agassi, Rafael Nadal, Carlos Alcaraz, Peters and MGM Resorts International CEO William Hornbuckle at the Netflix Slam.Photographer: David Becker/Getty Images
Seated courtside at the Michelob Ultra Arena in Las Vegas on March 3, Peters was still giddy. He’d started the day by hitting the ball around with Spanish tennis stars Rafael Nadal and Carlos Alcaraz. Now, seated near his wife, daughter and a few colleagues, Peters watched as Nadal and Alcaraz traded groundstrokes on a black court at the Mandalay Bay casino. Peters, an avid tennis player, broke down the contrast in styles: Nadal, the wily veteran, was still recovering from a hip injury, which limited his mobility but not his trademark grit. Alcaraz, all power and speed, is a leader of the sport’s new guard.
The Netflix Slam is a far cry from Wimbledon, but it was the first proper live sporting event Netflix has shown in its 27-year history. It offered the match in English and Spanish, and one day it wants to air sports in multiple languages around the world. After years of film and TV, Netflix is starting to test out what its fans want to watch live. The company started with a stand-up performance by Chris Rock in March 2023, followed a month later by a reunion of the hit dating show Love Is Blind. The stream failed during the reunion, infuriating fans. But Netflix has gradually expanded its capabilities, either creating events of its own, such as a celebrity golf match, or licensing minor ceremonies, including the Screen Actors Guild Awards. The stakes for most events this year—both in terms of audience size and streaming prowess—are low as the company builds up for bigger stages in the future. Its live roast of retired football star Tom Brady was its most popular title for several days in a row earlier this month, and in July, Mike Tyson and influencer Jake Paul will face off in the boxing ring. Starting next year, Netflix will offer the weekly wrestling program Raw globally.
“The goal is that we can do at-scale events around the world every week, and we are not even breaking a sweat,” Peters says. He’s one of several Netflix executives who’ve encouraged the company to experiment with live sports. Some pushed for tennis. Others debated buying a surfing league. At first, these proposals didn’t go anywhere. The company had long said it didn’t have interest in live sports.
Yet Netflix has had to change its approach to support a major shift in priorities. For much of the company’s existence, the most important metric was the number of new subscribers it signed up every quarter. Its stock would rise and fall based on that figure. It commissioned programming it thought would attract new customers, expanding from English-language scripted TV into stand-up comedy, original movies, reality programming and animation in several languages. As the boost from the password crackdown subsides, Netflix is entering a new phase, one where making more money from its existing one is as important as adding more subscribers.
Netflix has identified three ways to do that: raise prices, sell ads and make video games. While raising prices has been a success, the other two initiatives are works in progress. Games inspired by hits like Stranger Things and Love Is Blind have been among the most popular, though while they extend the brand of the shows, they’re a tiny part of the business. Advertising is a more pressing need, but the executive Peters hired to run the business, Jeremi Gorman, proved to be a bad fit. She was fired after just one year.
The company’s biggest problem is scale. While Amazon and Disney told customers they had to pay more to avoid ads—meaning millions of existing subscribers now watch them—Netflix started from scratch. Most customers are still on an ad-free plan, even if the advertising tier is the most popular option for new sign-ups. Netflix has 40 million users for its ad tier across 12 countries, a fraction of the audience for Amazon’s Prime Video, to say nothing of YouTube. Its rates are also 50% to 100% more than the competition, and it refuses to share much data on the audience for specific shows or live events. Netflix generated just a couple hundred million dollars in ad sales last year. YouTube, its biggest competitor in online video, topped $30 billion.
As Netflix builds out its ad business, no programming is more appealing to marketers than live sports, which allows the company to also show ads to premium-tier members. Netflix has thus far been content to create its own one-off events. It’s yet to bid on rights to a major package from a premier sporting event—with all due respect to wrestling—because it feels most of the events are too expensive relative to the size of their audience. Yet most analysts believe it’s only a matter of time before Netflix bids on something big; the company has had talks with the NBA and struck a deal with the NFL to show two games on Christmas Day. “We’d love to do sports,” Peters says. If the company can figure out a way to do it profitably, “we would do it day and night.”
Toward the end of the tennis match in Las Vegas, Alcaraz and Nadal began to pick up the intensity. Nadal cruised in the first set, while Alcaraz battled back to win the second. Before the start of the tiebreaker—first to 10 points—Peters excused himself to prepare for the trophy presentation. Although most hardcore fans wanted to see Nadal win for old times’ sake, Alcaraz edged out his childhood idol. He lifted the trophy, standing next to Peters and eight-time Grand Slam champion Andre Agassi. After a brief stop at an after-party filled with Netflix-branded swag, Peters ducked out to catch a flight home. On his way out of the arena, a fan approached him and asked if he was the CEO of Netflix. She’d recognized Peters on the court. It was the first time all night a stranger knew who he was.
A couple of years into Peters’ time in Tokyo, Hastings called him and asked what he had planned that weekend—Hastings wanted to fly in the next day to speak with him. For a moment, Peters wondered if he was getting fired. Instead, Hastings asked him to become Netflix’s chief product officer. Peters’ tenure in Japan was seen as a bust by most at Netflix, but Hastings remained confident that Peters had successfully tackled a new challenge. “We didn’t second-guess ourselves by saying, ‘Maybe if we had a better GM,’” Hastings says. In 2017 he fired Hunt and put Peters in charge of product. Japan is now one of Netflix’s largest markets in Asia.
It wasn’t long after returning from Japan that Peters started to examine password sharing. The company didn’t regard it as a problem, all but encouraging users to game the system. It was still adding tens of millions of customers a year and figured any additional viewers amounted to free marketing. Peters knew it would eventually become a problem. As Netflix got bigger, it would become harder to attract as many new customers. He tested ways of cracking down on sharing, starting with the most egregious abusers. The company emailed them to say it was aware of their behavior and asked them to stop. If they didn’t, Netflix would shut down their account. This initial outreach was modest in scope. Netflix didn’t yet think password sharing was an urgent issue, and the company was worried about how customers would respond.
That tolerance for moochers started to change in fall 2021. The early days of the pandemic had been a boon to the company; around the globe, it added more than 165,000 customers a day in the first three months of 2020. Yet growth slowed in the second half of the year and remained sluggish throughout 2021. Netflix was reaching the upper limits of its potential audience in the US, where the streaming service already had more than 60 million customers and an additional 30 million or so were using someone else’s account. Cable TV had peaked at about 100 million households in the US; Netflix didn’t have much room to grow.
Home screen of Netflix’s mobile app.Photographer: Timon Schneider/Alamy
While everyone at the company agreed it had to crack down on password sharing, the question was how. It was easy to spot egregious cases, but the practice takes many forms. Some people share their account with partners or children they live with. That’s seen as legitimate. Some share their account with a friend or relative who lives in another place. That’s more problematic (and widespread). And then there are folks sharing passwords with dozens of people, often reselling accounts to those who can’t or don’t want to pay via traditional means. The company built a computer model to differentiate between someone traveling in another country and someone using their cousin’s account.
Once the company identified who was sharing an account, it had to figure out how to make the freeloaders pay. This debate became one of the most heated in the history of Netflix. On one side was Hastings, the company’s longtime leader. He thought Netflix should charge by the residence, like cable did. That meant people would pay per home and need another account for anywhere else. On the other side was most of Hastings’ executive team. Peters thought the residence model violated a central tenet of Netflix: If you paid for it, you could take it with you. He proposed a model based on the individual user. A customer could access Netflix wherever they went, and people who wanted to add users to their accounts would need to pay a fee.
Hastings can be stubborn, rooted in self-confidence from three decades of success (and a net worth of about $6 billion). But he agreed to test both plans. In 2022, Netflix rolled out the user model in Chile, Costa Rica and Peru and the residence model in five other Latin American countries. Password sharing was most widespread in the region, and it’s long served as an ideal testing ground: Most countries speak Spanish and present similar challenges around payments because many people don’t have bank accounts. The tests were unambiguous. Peters’ approach—the model based on the user, not the home—led to more sign-ups, fewer cancellations and less online outrage. “Greg got it right,” Hastings says. (Netflix’s crackdown on password sharing has been so successful that Disney and Warner Bros. Discovery Inc. are planning to do the same later this year.)
By this point, Hastings had been thinking about succession for some time. He and his board would talk about it several times a year, well before retirement was a consideration, and Hastings had kept a list of 10 to 15 employees he wanted to position for senior roles. He regularly invited board members to meetings with his direct reports so they could be more familiar with leadership. The board had already promoted Sarandos to become co-CEO in July 2020—a recognition that he already oversaw the company’s Hollywood operation (and thus most of its budget), but also a test of the co-CEO model. At the same time, Hastings had promoted Peters to chief operating officer, giving him a broader portfolio as well.
Few companies employ two CEOs, and from the outside, Peters and Sarandos appear to be an odd couple. Peters strives for efficiency; he tries to limit one-on-one meetings with colleagues to a half-hour. Sarandos is a schmoozer who pals around on weekends with his celebrity friends. And Peters, despite his mild-mannered exterior, is one of the most competitive people at Netflix. During company off-sites with top executives, Peters has turned friendly games of Family Feud or Iron Chef into blood sports. (Some have even accused him of cheating, an accusation he “categorically” rejects.) Yet Hastings and Sarandos were also an unlikely pairing, and their partnership built a roughly $260 billion entertainment giant. Netflix has long defied convention by fusing Hollywood and Silicon Valley. Hastings was confident that Sarandos and Peters would put the company’s needs first. In January 2023, Netflix announced Hastings would transition into a role as executive chairman and promoted Peters to co-CEO. Sarandos says that his relationship with Peters is “surprisingly high functioning” and that they’ve “found a really interesting groove.”
Andre Agassi, Rafael Nadal, Carlos Alcaraz, Peters and MGM Resorts International CEO William Hornbuckle at the Netflix Slam.Photographer: David Becker/Getty Images
Seated courtside at the Michelob Ultra Arena in Las Vegas on March 3, Peters was still giddy. He’d started the day by hitting the ball around with Spanish tennis stars Rafael Nadal and Carlos Alcaraz. Now, seated near his wife, daughter and a few colleagues, Peters watched as Nadal and Alcaraz traded groundstrokes on a black court at the Mandalay Bay casino. Peters, an avid tennis player, broke down the contrast in styles: Nadal, the wily veteran, was still recovering from a hip injury, which limited his mobility but not his trademark grit. Alcaraz, all power and speed, is a leader of the sport’s new guard.
The Netflix Slam is a far cry from Wimbledon, but it was the first proper live sporting event Netflix has shown in its 27-year history. It offered the match in English and Spanish, and one day it wants to air sports in multiple languages around the world. After years of film and TV, Netflix is starting to test out what its fans want to watch live. The company started with a stand-up performance by Chris Rock in March 2023, followed a month later by a reunion of the hit dating show Love Is Blind. The stream failed during the reunion, infuriating fans. But Netflix has gradually expanded its capabilities, either creating events of its own, such as a celebrity golf match, or licensing minor ceremonies, including the Screen Actors Guild Awards. The stakes for most events this year—both in terms of audience size and streaming prowess—are low as the company builds up for bigger stages in the future. Its live roast of retired football star Tom Brady was its most popular title for several days in a row earlier this month, and in July, Mike Tyson and influencer Jake Paul will face off in the boxing ring. Starting next year, Netflix will offer the weekly wrestling program Raw globally.
“The goal is that we can do at-scale events around the world every week, and we are not even breaking a sweat,” Peters says. He’s one of several Netflix executives who’ve encouraged the company to experiment with live sports. Some pushed for tennis. Others debated buying a surfing league. At first, these proposals didn’t go anywhere. The company had long said it didn’t have interest in live sports.
Yet Netflix has had to change its approach to support a major shift in priorities. For much of the company’s existence, the most important metric was the number of new subscribers it signed up every quarter. Its stock would rise and fall based on that figure. It commissioned programming it thought would attract new customers, expanding from English-language scripted TV into stand-up comedy, original movies, reality programming and animation in several languages. As the boost from the password crackdown subsides, Netflix is entering a new phase, one where making more money from its existing one is as important as adding more subscribers.
Netflix has identified three ways to do that: raise prices, sell ads and make video games. While raising prices has been a success, the other two initiatives are works in progress. Games inspired by hits like Stranger Things and Love Is Blind have been among the most popular, though while they extend the brand of the shows, they’re a tiny part of the business. Advertising is a more pressing need, but the executive Peters hired to run the business, Jeremi Gorman, proved to be a bad fit. She was fired after just one year.
The company’s biggest problem is scale. While Amazon and Disney told customers they had to pay more to avoid ads—meaning millions of existing subscribers now watch them—Netflix started from scratch. Most customers are still on an ad-free plan, even if the advertising tier is the most popular option for new sign-ups. Netflix has 40 million users for its ad tier across 12 countries, a fraction of the audience for Amazon’s Prime Video, to say nothing of YouTube. Its rates are also 50% to 100% more than the competition, and it refuses to share much data on the audience for specific shows or live events. Netflix generated just a couple hundred million dollars in ad sales last year. YouTube, its biggest competitor in online video, topped $30 billion.
Netflix Share Price
Source: BloombergAs Netflix builds out its ad business, no programming is more appealing to marketers than live sports, which allows the company to also show ads to premium-tier members. Netflix has thus far been content to create its own one-off events. It’s yet to bid on rights to a major package from a premier sporting event—with all due respect to wrestling—because it feels most of the events are too expensive relative to the size of their audience. Yet most analysts believe it’s only a matter of time before Netflix bids on something big; the company has had talks with the NBA and struck a deal with the NFL to show two games on Christmas Day. “We’d love to do sports,” Peters says. If the company can figure out a way to do it profitably, “we would do it day and night.”
Toward the end of the tennis match in Las Vegas, Alcaraz and Nadal began to pick up the intensity. Nadal cruised in the first set, while Alcaraz battled back to win the second. Before the start of the tiebreaker—first to 10 points—Peters excused himself to prepare for the trophy presentation. Although most hardcore fans wanted to see Nadal win for old times’ sake, Alcaraz edged out his childhood idol. He lifted the trophy, standing next to Peters and eight-time Grand Slam champion Andre Agassi. After a brief stop at an after-party filled with Netflix-branded swag, Peters ducked out to catch a flight home. On his way out of the arena, a fan approached him and asked if he was the CEO of Netflix. She’d recognized Peters on the court. It was the first time all night a stranger knew who he was.