Netflix Is Better Off Independent: CEO Reed Hastings
Despite many who would like to see a larger partner buy Netflix, co-founder and CEO Reed Hastings said it is better off on its own. Hastings spoke with CNBC's "Squawk on the Street" on Wednesday from California.
When asked whether an acquisition by Microsoft or another company is possible, Hastings said, "Netflix is really best independent because we are on so many platforms. We do incredible work on the Microsoft platforms, the Google platforms, the Apple platforms and on all the TVs. The value of Netflix is really when it's on every screen that you want to use."
Shares fell from session highs on the comment.
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Netflix is not on the BlackBerry Z10 smartphone, though, which Hastings attributed to that company's traditional market position.
Netflix is "really focused on entertainment screens," he said. "BlackBerry has been a tremendous work device. An entertainment platform is what we're focused on."
Another major provider of streaming video—Hulu—would be more of a threat as a stand-alone company, Hastings said. "If they were independent, they would have the most hunger. If they're in another big company, I don't think which big company would matter too much."
He also dismissed speculation about price increases, saying that a larger user base will let Netflix keep pricing stable, and he characterized Netflix's relationship with activist investor Carl Icahn as "great."
For video overall, Hastings sees "4K" technology as an important emerging trend; 4K is an ultrahigh definition format, with about twice the resolution of a traditional HDTV.
"It's just an incredible video quality," he said, predicting that eventually Internet streaming will be in this format.
The big news this week was that seven years after the cancellation of cult favorite "Arrested Development," the company revived the show for a Netflix-only fourth season. The 15-episode season, which received mixed reviews from critics, was posted in its entirety Sunday.
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The move—part of Netflix's strategy to allow "binge viewing" of exclusive content as the company looks to differentiate itself from competitors such as Hulu and Amazon Prime—follows a similar exclusive release of political drama "House of Cards" in February.
"It's a really big investment on original content—there's no question," Hastings said. "It's been a huge win for us, and we're just going to continue to grow it."
Hastings compared the strategy with HBO's shift from showing studio movies to generating its own content.
"We're continuing to invest more and more in originals, and we'll take it up bit by bit," he said. "We're really looking for shows that are unique in some way, and that's really helping us with international expansion and domestic growth."
The company doesn't expect to take on additional debt to fund the production of exclusive content, he said.
"We've had very high expectations from the beginning for 'Arrested Development,' " Hastings said. "It's got a well-known brand, and it met all of those expectations. We've been thrilled with the response, it's been huge, just as we had hoped."
Netflix isn't focused on ratings and won't release that information, he said, adding that it's concentration is on longer-term viewership of exclusive programming.
Early traffic numbers from network intelligence company Procera indicated that "Arrested Development" had a significant impact on streaming Sunday. It said that 10 percent of subscribers had watched the entire season by Monday, while peak Web traffic was up 10 percent from the previous week, which Procera attributes to the show.
Some analysts discount the way Netflix has executed its exclusive content strategy.
Michael Pachter, senior analyst at Wedbush Securities, holds an underperform rating on Netflix stock, with a $65 price target—70 percent below its current trading level. In early May, he told "Squawk on the Street" that the company should be valued at 1 times revenue, with expectations of slower growth.
(Read More: Will Netflix Go to $65 ... or $325?)
Ownership of exclusive content is also a sticking point, he said.
"Someone else produces content. Netflix buys exclusive rights for a very limited period of time, and then Netflix doesn't own the content anymore," Pachter told CNBC on May 13. "This is not the same as the HBO model. They are nothing like HBO. They have a three-year window to show 'House of Cards.' After that, nothing. They don't own it, they can't exploit it further unless they pay more. That's not ownership of content."
"People overvalue the domestic streaming business and they discount the fact that the domestic DVD business is all of their real profits, and that is going away," he said.