Netflix CEO Reed Hastings: We spend money more like a media company than a tech company

Key Points
  • Netflix's $10 billion content and marketing budget versus its $1.3 billion technology budget shows its much more of a media company in that respect than a technology one, CEO Reed Hastings said.
  • However because it is does not use advertising it doesn't have the same issues regarding data privacy other streaming video providers are facing.
Netflix CEO Reed Hastings
Ethan Miller | Getty Images

Netflix's spending priorities are more typical of a media company than a technology one, according to CEO Reed Hastings.

"We'll spend over $10 billion on content and marketing and a billion-three on tech," Hastings said on a call with analysts.

"So, I mean, just objectively, we're much more of a media company in that way than pure tech. Of course, we want to be great at both. But, again, we're really pretty different from the pure tech companies."

It's an interesting admission for the company, whose valuation is approaching $140 billion after reporting strong Q1 earnings on Monday afternoon.

That valuation is only about $10 billion less than media giant Disney, despite the fact that Netflix is a significantly smaller business: In the last quarter of 2017 (the last quarter both companies reported), Netflix earned $186 million on $3.29 billion in revenue, while Disney earned $4.4 billion on $15.35 billion in revenue.

This relatively high market cap suggests that investors look at Netflix's growth and characterize it more like a tech company than a typical media company.

Hastings' embrace of its media company status also stands in stark contrast to Facebook CEO Mark Zuckerberg. (Hastings sits on Facebook's board of directors.)

During Zuckerberg's congressional testimony on April 11, the executive was asked if Facebook was a media company because it offered original shows and exclusive broadcasting rights. Zuckerberg said Facebook is a technology company because its primary function was to build products and services for people.

Being designated as a media company would also open Facebook to stricter advertising regulations.

However, Netflix doesn't have to worry about those regulatory challenges because it doesn't serve ads.

"I'm very glad that we built the business not to be ad-supported, but to be subscription," Hastings said. "We're very different from the ad-supported businesses, and we've always been very big on protecting all of our members' viewing. We don't sell advertising. So, I think we're substantially inoculated from the other issues that are happening in the industry and that's great."

In the first quarter, Netflix earned 64 cents per share, matching the Thomson Reuters consensus estimate, and slightly beat on revenue of $3.7 billion, topping the $3.69 billion estimate. However, it showed higher than expected growth in subscription additions, welcoming 7.41 million new subscribers, and beat on guidance, sending the stock up more than 6 percent after hours

- CNBC's Anita Balakrishnan contributed to this report.