Netflix’s ouster of top executives capped two weeks of turmoil

When Netflix Inc. co-chief executive Ted Sarandos invited Bela Bajaria to his office around 4:30 p.m. on Wednesday Oct. 14, she didn’t think much of it. These kind of casual drop-ins were common for the two executives, who worked in adjoining offices on the 11th floor of Netflix’s Hollywood headquarters.

Though rumours about Bajaria’s job security had circulated in recent months, especially after a well-publicized meeting between Sarandos and HBO boss Casey Bloys, Bajaria had worked at Netflix for a decade and delivered on what she had promised to Sarandos and the board. The company was, by most conventional metrics, doing well.

It didn’t take long for Bajaria to realize this wasn’t a normal meeting. Sarandos said he was firing her as chief content officer and replacing her with Peter Rice, a veteran of Walt Disney Co. and Fox. Bajaria cancelled plans to attend the premiere of the third season of Nobody Wants This, went home and never returned to a Netflix office. She did have a virtual meeting with her staff the next day.

“It was an honour of a lifetime and so much FUN,” Bajaria wrote in a note to staff. “It won’t be the last you hear of me.”

The news shocked Netflix and the broader entertainment industry, much like when Sarandos fired his long-time lieutenant Cindy Holland in 2020, a decision that led to Bajaria’s rise. But it didn’t come from nowhere.

A failed bid for Warner Bros. and stagnant engagement had caused a steep drop in Netflix’s stock price. Sarandos felt he needed to reassure investors that Netflix had a plan to bring in more viewers. A steady drumbeat of complaints from creative partners, talent departures and critical headlines about the company’s programming had also convinced Sarandos that he needed to prove to Hollywood that Netflix was still cool.

The company is now trying to walk a tight rope, insisting that its streaming service is doing fine while also undergoing its greatest job cuts and executive turmoil in five years. “Two things can be true,” co-chief executive Greg Peters said during a town hall with staff. “We have an enviable, growing and profitable business. And, at the same time, we know there’s more work to do to drive more growth.”

The following account is based on conversations with more than a dozen people, including current Netflix employees, former employees and business partners. The company declined to comment.

When Sarandos first named Bajaria his global head of TV in 2020, he tasked her with overhauling Netflix’s approach. The company no longer wanted to be HBO, it wanted to replace the entire cable bundle. Bajaria pushed Netflix into reality TV and live sports. She built up programming teams all over the world, giving Netflix a lead in local-language shows and movies.

The plan worked, attracting tens of millions of new customers. (The crackdown on password sharing also played a huge part.) Still, some in the press and the industry complained that Netflix was becoming Walmart, a view reinforced by a New Yorker article that said Bajaria’s preferred type of programming was akin to a gourmet cheeseburger. (The line actually came from her deputy, Jinny Howe.)

Sarandos and Bajaria dismissed such criticism as coastal elitism. Netflix was the most popular streaming service in the world. Even its only moderately successful programs were viewed by more people than HBO’s biggest hits. As it faced more competition, Netflix had six of the 10 most-watched original streaming series in the United States last year.

Yet Netflix has spent most of this year trying to understand why people aren’t spending more time watching the streaming service. The average customer is spending fewer days a month watching Netflix — a metric known as qualified play days. The average user is also spending less time watching the service.

Shows executives thought would be big hits, like Little House on the Prairie, fell short of expectations. New seasons of past hits, like Beef, surrendered most of their viewers. Netflix had plenty of successes, but none of the culture-defining hits that had become so common. The company just won its fewest Emmys in a decade.

This problem was most acute in the U.S., Netflix’s biggest market and the place where the company spends the most money on shows. Hits from the U.S. travel all over the world, fuelling growth and engagement in Latin America and Europe.

This blip caused everyone to point fingers at one another. The programming team wondered if a recent overhaul of the user interface was the problem, or if the app wasn’t serving new seasons to enough people. The product team said the shows weren’t good enough.

Bajaria addressed domestic programming problems last year by firing Peter Friedlander, who hopped over to Amazon.com Inc. She also expanded the company’s programming into podcasts and YouTube creators, hoping to lift viewership during the day and appeal to younger viewers. Neither category was especially popular with Sarandos, who has since pledged the company will refocus on its core of premium film and TV.

A programming blip alone doesn’t explain the turmoil of the last couple weeks. If you listen to Sarandos explain why he fired Bajaria and replaced her with Rice, he kept coming back to the same word: talent.

“Peter Rice understands talent relations,” Sarandos said on a call with analysts this week. “In a competitive market, creative talent have choices of where they want to work and we want Netflix to always be the place that they love to do the best work of their life.”

Netflix used to be that place. But, in recent years, the company’s primary appeal to talent is that it offers the largest audience. For Sarandos, film chief Dan Lin was the face of this problem.

Bajaria brought in Lin in 2024 to overhaul the company’s movie studio. She felt his predecessor, Scott Stuber, was making too many movies and spending too much money. Stuber doesn’t like to say the word no. Lin has no such issue. He pared down the slate and passed on ideas from many of the company’s creative partners, like Peter Chernin and Steven Spielberg.

That made him unpopular with some very powerful people, many of whom reached out to Sarandos. Several long-term partners, such as the Duffer Brothers, Noah Baumbach and Shawn Levy also left for other companies. David Fincher opted not to renew his deal.

Sarandos voiced his frustration to Bajaria, urging her to make a change. As far as Lin was concerned, he was doing what he had been asked. Most of his films this year were considered “loved” under the internal metric MVS, which measures viewer satisfaction based on whether they stick with titles and show affection by giving a movie a double thumbs up. Bajaria knew Lin could use a little help with his bedside manner, but he had also delivered an Oscar contender three years in a row with Emilia Perez, Train Dreams and La Bola Negra.

Each of these concerns was easy to dismiss in isolation. Every network has a bad year at the Emmys. The Duffers and Levy left because they wanted to make movies for theaters, which is not the norm at Netflix because of Sarandos. Baumbach’s films haven’t been runaway successes. Fincher is taking a sabbatical, he’s not leaving for a rival.

Yet, taken together, it pushed Sarandos to act. First, he fired Bajaria. Then, two days later, he dismissed Lin.

Some in Hollywood and on Wall Street feel the company’s leadership has overreacted, amplifying concerns about a company that remains in a strong position. It’s still growing by double digits, faster than its peers in Hollywood. It’s on pace for about US$15 billion in profit this year.

Netflix is just entering a different phase. It’s now a mature media company – slow growth and high profits. After 25 years of rapid growth, gravity was going to arrive at some point.

But maturity is not a good recipe for Netflix’s stock price. The company has historically traded at a much higher multiple than other media companies because it was growing more quickly.

Firing Bajaria and hiring Rice has reset the narrative for Netflix in Hollywood, which greeted the news with a mix of depression and excitement. Netflix, seemingly the most stable of the major entertainment companies, is overhauling its team and firing people – just like Skydance, Disney and the rest of the industry. But Rice is a widely respected executive with deep talent relationships.

But it won’t immediately mollify investors. Shares in the company fell 6.6 per cent this past week, which had more to do with the company’s tepid forecast for the end of the year than any executive change.

Netflix’s problems didn’t start with programming. Investors started to worry as soon as Sarandos and Peters decided to try and buy Warner Bros. and HBO. That deal is also when Sarandos started talking to Rice about joining the fold. Sarandos reached out to Rice about managing the Warner Bros. assets, a conversation that picked up against in recent weeks.

Peters and Sarandos need to prove to Wall Street that they have ideas for how to re-accelerate growth and boost engagement. They have teased some of these ideas. The company would like to sell other streaming services and integrate their programming into the service.

Netflix also faces major decisions about sports rights and is seeking to integrate more programming from international partners, akin to its deal with French broadcaster TF1. These are areas where Amazon and YouTube are far ahead.

Morgan Stanley praised Netflix for taking “decisive action to address concerns” while Pivotal Research Jeff Wlodarczak wrote his firm’s “concerns around Netflix remain unchanged,” citing greater competition from short-form video, free streaming and Skydance.

Unlike the last time Netflix’s stock tanked, the company doesn’t have an obvious solution. It’s spent most of the year telling investors that it’s going to be just fine. It also doesn’t have co-founder Reed Hastings. Changing the narrative, overblown or not, will require Sarandos and Peters to work together.