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Netflix Appoints Ted Sarandos as Co-Chief Executive

Netflix announced a significant leadership change Thursday, appointing Ted Sarandos, the content chief, as its co-chief executive alongside Reed Hastings.

“I am excited to announce that we have appointed Ted Sarandos to be Netflix co-C.E.O. with me, and also elected him to our board of directors,” Mr. Hastings said in a statement. Mr. Sarandos, 55, will continue as head of content.

The change in many ways formalizes Mr. Sarandos’s role in the company. His compensation for the last few years has been equal to that of Mr. Hastings — each received about $30 million in compensation in 2019 — and he has often been the face of Netflix at public events.

Mr. Sarandos said he was originally skeptical of Netflix when he was approached to join the company 20 years ago, but agreed to come aboard because of the “persistence” of Mr. Hastings. “I’m excited and honored to have been appointed co-C.E.O. of Netflix,” he said in a statement.

The announcement of the promotion came on a day when the streaming service reported a surge of 10.1 million new customers in its second-quarter results, extending the gains it made the first three months of the year, when the coronavirus pandemic prompted lockdowns across the globe.

The company had forecast the addition of 7.5 million subscribers, and Goldman Sachs predicted 12.5 million in a note last week. It’s likely the rapid growth is a result of more people choosing to subscribe because of stay-at-home restrictions.

Indeed, Netflix expects a much weaker performance in the current quarter and forecast the addition of 2.5 million new subscribers. Investors sold off the stock on that prediction, sending the company’s shares down more than 10 percent in after-hours trading.

Netflix reported that it now had 192.95 million customers worldwide and about 66 million in the United States. That puts the service that closer to the magical 300 million figure, a loose measure of where investors think Netflix could top out.

Netflix found its early success by mailing DVDs to subscribers in red envelopes as it took on the once-mighty Blockbuster. In its next phase, it transformed itself into a streaming giant mainly by licensing old movies and shows.

In recent years, it has become one of the industry’s most prolific sources of film and TV production. Mr. Sarandos now moves easily within Hollywood’s circles of power, brokering big-budget projects with Martin Scorsese, Will Smith, Shonda Rhimes, Ryan Murphy, Sandra Bullock and Adam Sandler. In short, the company has become more dependent on Mr. Sarandos’s domain: original content.

Netflix on Thursday also announced that it had promoted Greg Peters, the head of the company’s product group, to chief operating officer, a move that could help Mr. Sarandos devote more time to content production.

Mr. Hastings will remain chairman. “In terms of the day-to-day running of Netflix, I do not expect much to change,” he said. He added that the leadership moves “are part of a long process of succession planning.”

In a call with investors on Thursday, Mr. Hastings said he was not going anywhere. “To be totally clear, I’m in for a decade,” he said. He repeated himself for emphasis: “So let me be very clear on that. I’m in for a decade.”

Netflix also reported that its slate of new productions was on track last quarter, adding that its planned releases of new shows and films for the rest of the year were “largely intact.”

Blockbusters like “Extraction,” a thriller starring Chris Hemsworth that was released in April, drew 99 million views in its first four weeks, the company said. Last week, Netflix debuted “The Old Guard,” a smart, humane action epic starring Charlize Theron. Fresh programming is crucial to Netflix’s growth because new shows tend to drive new subscriptions.

The company said it would release several new series and films later this quarter, including Season 2 of “The Umbrella Academy,” and “Enola Holmes” a period mystery film with Millie Bobbie Brown, a star of the Netflix hit “Stranger Things,” playing the sister of Sherlock Holmes.

Netflix had to close most of its productions because of the coronavirus, but some shoots are underway. South Korea never shut down, and productions have restarted in Britain, France, Germany, Italy, Japan, Poland and Spain. For 2021, the company expects more of its lineup to be released in the second half of the year.

The shutdowns have temporarily helped Netflix’s cash position, because the company spent less than anticipated on productions. It reported nearly $900 million in positive free cash flow this quarter, making it the second-consecutive period in which it had more cash come in the door than go out. Netflix now expects to keep its money for the year and could end up with positive free cash flow for 2020, meaning it will finally be profitable on a balance-sheet basis.

But that will be short lived once a full slate of productions is underway. The company said it expected to burn more cash in 2021 as it spends more on content.

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Netflix C.E.O. Reed Hastings Gives $120 Million to Historically Black Colleges

Reed Hastings, the co-founder of Netflix, and his wife, Patty Quillin, donated $120 million to the United Negro College Fund, Spelman College and Morehouse College, the largest-ever individual gift to support scholarships at historically black colleges and universities.

The record donation comes amid protests following the police killing of George Floyd, and the national conversation about how to end systemic racism. That conversation has included discussions about how to provide more education and job opportunities for African Americans.

Unlike the Ivy League universities that have endowments in the tens of billions of dollars — Harvard University’s endowment tops $40 billion — the top historically black colleges and universities, or H.B.C.U.s, have endowments that are the hundreds of millions of dollars. Spelman College’s endowment, for example, is around $390 million.

Mr. Hastings said he and Ms. Quillin want to help change that.

They have made education a primary focus of their philanthropy, and have given smaller amounts in the past several years to the same institutions. “I think white people in our nation need to accept that it’s a collective responsibility,” Mr. Hastings said. Mr. Floyd’s killing and the emotional outpouring that followed were “the straw that broke the camel’s back, I think, for the size of the donation,” he added.

Mr. Hastings said that he hoped that the donation would lead other wealthy individuals to give to H.B.C.U.s. “Generally, white capital flows to predominantly white institutions, perpetuating capital isolation,” he and Ms. Quillin said in a statement announcing the donation. Mr. Hastings is worth $5.3 billion, according to Bloomberg.

Indeed, many of the largest donations in education have been made by alumni to their alma maters. Michael R. Bloomberg, the former New York mayor, gave $1.8 billion to Johns Hopkins University in 2018; his collective gifts to that school top $3 billion.

Last year, the billionaire financier Robert F. Smith donated $34 million to pay off the debts of Morehouse’s graduating class, one of the biggest individual H.B.C.U. donations at the time.

Dr. David A. Thomas, president of Morehouse College, said that raising money at the scale usually given to the top, historically white schools has been near impossible. “The reality is that our alumni have done quite well. But I don’t think we have any billionaires,” he said.

Before he came to Morehouse, Dr. Thomas taught at Harvard Business School and was the dean at Georgetown University’s business school. “There you had much more wealth within the alumni base. So you don’t have to go out as much,” he said. “And it’s easy to raise money from people who aren’t in the alumni base because your alumni can take you to them. Here, it’s really about developing and cultivating relationships, oftentimes with people who don’t know what an H.B.C.U. — what that even means.”

The need for funds is particularly acute given the economic challenges that the Covid-19 pandemic is creating both for students and schools, said Dr. Michael L. Lomax, the chief executive of the United Negro College Fund, who introduced Mr. Hastings and Ms. Quillan to Spelman and Morehouse. He is hoping to raise $1 billion to address the effects. “That’s the scale of the need,” he said. “So we’re at about $60 million today. $40 million of that is from Patti and Reed. We need not 10 times that amount. We need almost 20 times that amount.”

Mr. Hastings and Ms. Quillan have been active in education philanthropy and reform for many years. Mr. Hastings has promoted charter schools and briefly sat on the board of education in California. He is on the board of Pahara Institute, a nonprofit that helps train teachers and supports the education reform movement. Recode reported on Tuesday that Mr. Hastings is building a retreat in Colorado for teacher training. He and Ms. Quillan have signed the Giving Pledge, promising to give away the majority of their wealth to philanthropic causes.

Mr. Hastings has also sought to diversify Netflix’s work force. Netflix reported that seven percent of its employees in the United States are African-American, as are eight percent of its company leaders, which is among the highest in the technology industry (but still only about half the share of African-Americans in the overall population). Netflix was an early supporter of high-profile black directors like Ava DuVernay. Yet the company has also been accused of promoting content by race, which it disputes as impossible because it says it doesn’t collect information about the ethnicity of its customers.

The large donation to the H.B.C.U.s, which will receive $40 million each, came as a surprise to their leaders.

“When they first talked to us they said to us they were making a $20 million gift. And we thought that was unbelievable. I mean, truly I was speechless. I actually cried,” said Dr. Mary Schmidt Campbell, Spelman College’s president. The next day, she received an email from Ms. Quillin: “They were upping it to $40 million.”