Netflix cofounder Reed Hastings will depart Netflix to “focus on his philanthropy and other pursuits” when his term as chairman of the board of directors ends in June.

Netflix shares plummeted more than 9% on Thursday as the TV streaming titan’s quarterly earnings failed to impress investors and co-founder Reed Hastings announced he is leaving.

Hastings, who helped grow the revolutionary DVD-by-mail company into a global entertainment behemoth, will depart Netflix to “focus on his philanthropy and other pursuits” when his term as chairman of the board of directors ends in June.

He ceded daily control of Netflix to co-CEOs Greg Peters and Ted Sarandos in early 2023.

“Netflix changed my life in so many ways,” Hastings wrote in an earnings letter. “My all-time favourite memory was January 2016, when we enabled nearly the entire planet to enjoy our service.”

Netflix faces increasing competition from rival streaming services as well as short-form video platforms like TikTok that vie for consumers’ attention.

The company based in Los Gatos, California, reported quarterly revenue of $12.25 billion, a result that slightly topped expectations.

Reshaping US media

The share price slide came despite Netflix reporting a profit of $5.28 billion, which was boosted by a fee received for the termination of a deal to buy Warner Bros Discovery.

During the recently ended quarter, Netflix declined to sweeten its takeover offer of Warner Bros, effectively ceding the media giant to a rival bid from Paramount Skydance after deciding the deal was no longer financially attractive.

Netflix logged a termination fee of $2.8 billion related to the nixed deal, according to its earnings report.

By not following through on the arrangement, Netflix will likely see the storied Hollywood studio and a group of TV properties — which includes CNN — fall into the hands of Paramount, fundamentally reshaping US media.

Paramount’s deal to buy Warner Bros Discovery is in a regulatory and shareholder approval phase.

The bidding war had drawn White House attention, with President Donald Trump insisting he had a say in the outcome.

Oracle founder Larry Ellison is the father of Paramount Skydance CEO David Ellison. Larry Ellison, a longtime Trump ally, largely financed his son’s takeover of Paramount and his subsequent bid for Warner Bros. Discovery.

A victory by Paramount would see CNN — often the target of Trump’s threats and criticism — pass to Ellison family control, amid backlash that a Paramount-owned CBS would see changes to the White House’s liking.

Netflix shares climbed after it stepped away from the Warner bidding, with analysts noting that the money it saved could be invested in audience-drawing shows and its potentially lucrative advertising business.

“Netflix won with investors when it lost Warner Bros Discovery,” said Emarketer senior analyst Ross Benes.

“Netflix’s next challenge will be to truly diversify away from having subscriptions account for almost the entirety of its revenue.”

Baseball and ads

The streamer’s advertising platform continues to grow, and the company expects it to account for $3 billion in revenue this year, according to Peters.

He added that Netflix sees an opportunity in using artificial intelligence to make it easier for partners to customise ads.

“As the company enters a new era without Reed Hastings, advertising will play a bigger role,” Benes said.

Netflix is also pushing further into live sports, podcasts and games, executives said on an earnings call. The recently streamed World Baseball Classic was a hit on Netflix, according to Sarandos.

“It was the most watched programme we’ve ever had in Japan,” he said on the call. “It was really exciting to see how this played out.”