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Netflix board member: Spending billions of dollars on content is still a strength

Key Points
  • Netflix can expect strong growth ahead, fueled by happy customers and content dominance, according to Netflix board member Jay Hoag.
  • Some worry that Netflix is running up on a bubble, pumping out more content than consumers can reasonably watch.
  • But with tailwinds from global broadband penetration and the displacement of cable, the future looks bright for Netflix, Hoag says.
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Netflix board member on the future of content

Netflix can expect strong growth ahead, fueled by happy customers and content dominance, according to Jay Hoag, venture capitalist and Netflix board member.

"The wealth of content, the breadth of content, it's just — you'd have to quit your job to watch all that's on Netflix," Hoag said on CNBC's "Squawk Alley."

While a Netflix board member, Hoag said he was making personal observations, rather than speaking in his official capacity as a director.

Netflix stock dropped 6.2 percent on Wednesday after the shares failed to hold a key technical level and as part of a bigger sell-off in technology shares. A favorable report from Morgan Stanley on Apple's Netflix-competitor video service may have also contributed to the decline.

On Thursday, Netflix regained some of those losses. RBC Capital released a report recommending investors buy Netflix on the dip, due to its dominant position in the streaming video market.

Hoag, who founded Technology Crossover Ventures, said Netflix established its early dominance focusing on content spending in the early days and, of course, being one of the first to launch an over-the-top streaming service.

"They early on leaned very heavily into content spend in order to get subscribers, in order to be able to spend more on content, in order to get more subscribers. That, I think, is their virtuous cycle," Hoag said on Thursday.

They've maintained their grasp on the market, Hoag said, by keeping customers happy.

"The focus from inception to now is make sure you have an incredibly happy consumer subscriber base, and you can see that through viewing habits," Hoag said.

Some worry that Netflix and other streaming companies are running up on a bubble, pumping out more content than consumers can reasonably watch. But Hoag says "great content is forthcoming from multiple parties."

"There is an explosion of types of content, many shows, many documentaries, etc., that would not have seen the light of day before. I think there's been great stimulation of the creative community that is resulting in tremendous stuff, not some sort of bubble," he said.

With tailwinds from global broadband penetration and the displacement of cable, the future looks bright for Netflix and other over-the-top vendors, Hoag said.

"As long as [Netflix continues] to focus on just taking care of their own business, not necessarily worrying about others, I think they stand in good stead," he added.