Reed Hastings: Netflix vying for 'wallet share'

RANCHO PALOS VERDES, Calif.--Netflix CEO Reed Hastings says his company can't afford brand-new content yet.

Netflix is still fighting movie release "windows" and not offering new releases as quickly as it likes, Hastings said at the D9 conference here this morning. With subscriber fees of $8 a month, the company isn't able to pony up for brand-new content yet. "We're a complement to the new-release business," he said.

Discussing the challenges facing the video distribution company, Hastings said that the goal for Netflix is to make both content producers and subscribers happy. He confirmed that Netflix is paying more money to content producers all the time since its subscriber base is on the rise.

With 23 million subscribers and growing, and cable subscriptions growing, Hastings says that Netflix is competing for "wallet share" as well as consumers' time. Internet-connected TVs and "TV Everywhere" subscriptions that come with cable packages are future competition for the company.

Netflix is pushing on its video quality, its recommendation engine, and its social features to compete. "We're focused on growing our business," Hastings said, replying to interviewer Kara Swisher's question, "When are you selling to Apple?"

International expansion is a difficult play for Netflix, Hastings continued. Content deals are "country by country," unlike with rival Hulu, Hastings said. Canada was the first non-U.S. company, and a second one will come this year, though he did not say which. "Piracy is a big thing," he added, "and we're proud that we're now beating BitTorrent."

In addition to relaunching "forgotten" properties, like "Firefly," Netflix likes to do "prior season" content from content networks like Showtime, in order to complement traditional video distribution. Hastings says Netflix's content recommendation system is a good match for back-catalog content. But in a new experiment, Netflix is licensing new content, Kevin Spacey's "House of Cards," and will do more. "But the check's not big enough yet," Hastings said.

"We'll try a couple of different things," when it comes to original content, Hastings says. But he doesn't see Netflix as actually producing its own content. "We're a channel of distribution more than a movie studio."

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As to the importance of mobile devices for Netflix, Hastings said, "video is mostly consumed on the television." But most TVs, in the future, will have an app store, Hastings said. The important thing to do is make sure Netflix is on every device, so the consumer says, "It's an Internet device, so Netflix will run on it."

"The Internet TV is the big story," he said. There are killer apps now for the platform, he says, and this year, a half to two-thirds of TVs will be connected.

Tablets, he says, are not a revolution. "Wi-Fi in the TV, that's a revolution."

The other revolution is fiber-optic networking. "You can take 100 percent of Netflix streaming at peak time, and it still fits in one fiber-optic." Google is proving out the unlimited, uncapped networking model, he said, which is clearly a good thing for Netflix.

Hastings biggest worry, he said, is a slowdown in Netflix' innovation. He focuses at the company on having "talent density," the lowest number of highly talented people possible. "We haven't missed anything yet that's material for our market, but that could change at any point."

The DVD business is only temporary, he said. It will go away eventually, but for now users still like it. And "something will eventually replace the Internet" as well, he believes.