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Netflix Inc.’s transformation from a Silicon Valley upstart to a Hollywood studio is complete.

The streaming giant on Thursday named Ted Sarandos, the longtime head of its Hollywood operations, to be co-chief executive officer, alongside co-founder and current CEO Reed Hastings. Sarandos has worked at Netflix for two decades, rising from the head of a small content team to become the second-most-powerful executive at the company. He’ll also join the board of directors.

The promotion of Sarandos, 55, is in many ways a formality. Hastings has referred to Sarandos as his partner in running the company for the past couple of years, and defers to him on most matters related to film and TV production. Sarandos doesn’t need Hastings’s approval to order a Martin Scorsese movie or greenlight a new TV show from Ava DuVernay.

Yet his ascension also symbolizes the transformation of Netflix from a technology company into the world’s most valuable movie and TV company, with a market capitalization topping $230 billion. Netflix now produces as many shows and movies as any other studio, and its staff in Hollywood rivals that at its Los Gatos, California, headquarters.

“It definitely communicates that Ted Sarandos is going to be the guy to step right in,” Tuna Amobi, an analyst at CFRA, said on Bloomberg Television. “He has deep relationships in Hollywood and is well-regarded on Wall Street.”

Succession Talk

Netflix employees have whispered about Hastings’ possible succession for years, assuming he would at some point take his personal fortune of $6.3 billion and work on new projects. He’s devoted much of his extracurricular time over the past three decades to education reform, spending millions of dollars to support the proliferation of charter schools.

The appointment of a co-CEO signals Hastings, 59, isn’t quite ready to step aside. And he said as much on a call with analysts, stating he plans to be around for the next 10 years. But the move provides clarity about who might succeed him. The company also said Thursday that Greg Peters, the chief product officer, will become chief operating officer, a de facto second-in-command. Peters, who speaks five languages, will play a larger role in overseas growth.

Ted Sarandos | BLOOMBERG
Ted Sarandos | BLOOMBERG

Sarandos didn’t get much of a honeymoon as co-CEO. Netflix shares fell as much as 15 percent in extended trading Thursday after a lower-than-expected forecast for subscriber growth rattled investors.

“These changes are part of a long process of succession planning,” Hastings said in a statement. “While transitions can be hard, I am optimistic because we have a well-established culture that’s built to be flexible.”

Few companies employ co-chief executive officers, and those that do often struggle. Rupert Murdoch placed both of his sons in charge of 21st Century Fox Inc., assuming they could share control, only to sell most of the assets and watch the younger son, James, leave the family business.

Felix and Oscar

Hastings and Sarandos are an odd couple. Hastings is more cerebral and reserved, an engineer by training who doesn’t go to Hollywood awards shows or much care for small talk. Sarandos is a master schmoozer in the Hollywood tradition, a regular at industry and philanthropic functions with an encyclopedic knowledge of movies and TV.

That dynamic has made the partnership work over the past several years — delivering epic returns for investors. Hastings oversees the company’s overall strategy, meets with foreign diplomats and keeps his nose out of creative affairs. He remains widely respected in Silicon Valley, and is also aware of what he doesn’t know.

Sarandos, meanwhile, has had carte blanche to build the world’s largest film and TV studio, becoming one of the most powerful figures in Hollywood in the process. He oversees a team that is outmaneuvering the entire TV and movie industry, producing hundreds of programs that span reality shows, documentaries, sitcoms, standup comedy and blockbusters — all in multiple languages. Sarandos earned almost $35 million in total compensation last year.

“My journey to co-CEO of Netflix has been as a fan of great entertainment,” Sarandos said in a statement, in which he told a story about his mother insisting on the family having cable TV, even if the gas was cut off in the house.

Video Store

Hastings first reached out to Sarandos in 1999 after a trade publication profiled his work at a chain of video-rental stores. Netflix was still trying to make its DVD-by-mail business sustainable, and Hastings thought Sarandos would be able to help.

Hastings laid out his vision for what Netflix would become, transitioning from DVDs by mail to streaming video over the internet. Sarandos was skeptical of the vision, but still joined the company.

Sarandos began pushing for Netflix to produce original programming well before it started a streaming service. He created a division called Red Envelope Entertainment, which released original movies and standup specials on DVD for Netflix subscribers.

While that initiative failed, his second effort — starting with a Nordic show called “Lilyhammer” — succeeded beyond his wildest dreams, eventually making Netflix the industry’s most prolific studio. This year, the company earned more Academy Award nominations than any movie studio; it’s done the same with TV shows and the Emmys.

“As a teenager, one of the first video stores in Phoenix opened up a few blocks from my house, so I worked there to earn money for school,” Sarandos said in the statement. “Watching films and TV all day, and hearing what customers liked helped me understand people’s dramatically different tastes and moods, as well as the value of a good recommendation.”

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