Netflix CEO Hastings talks smack, ignites shares

Netflix’s outlook is nothing but rosy, the company said after its quarterly results Wednesday, and CEO Reed Hastings helped light a fire under Netflix shares with a confident outlook—and a personal shot at rival HBO.

It wasn’t just earnings, revenue, subscriber numbers and a first quarter outlook that beat expectations. In Hastings comments in a letter to shareholders, he dismissed concerns and pointed to growth opportunities, and in the Q&A session he responded to analyst concerns with snappy retorts.

The company reported net income of $48 million for the quarter, up from $8 million a year ago. Earnings-per-share were 79 cents, Netflix said in a statement after markets closed Wednesday. Shares were more than 17 percent higher on Thursday.

Swinging at HBO

Hastings has said repeatedly in the past that he’s HBO’s biggest fan, and HBO is also Netflix’s biggest competitor. There was no effusive praising of Time Warner’s cable channel after last night’s earnings report, no comments about how Netflix isn’t eating into HBO’s business. Hastings did weigh in on HBO’s comment last week that shared passwords aren’t a serious concern for HBO Go, which is designed to let users watch HBO programming online through a wide range of devices.

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Hastings snarked: “That was an interesting comment I suppose. So, I guess (Richard) Plepler is the CEO of HBO, doesn’t mind me then sharing his account information. So, it’s and his password is Netflix Bitch.”

No Net Neutrality, no problem

Hastings dismissed concerns that Net Neutrality’s rejection in court will drive costs higher for Netflix, saying it’s in the best interest of Internet Service Providers (ISPs) to continue to work with Netflix, rather than stick them with high costs.

“The most likely scenario at least in the near term is that there is no real change and the reason is if ISPs, especially major ISPs, were to contemplate blocking Netflix or other services, it will significantly fuel the fire for more regulation, which is not something they are interested in,” said Hastings on the call.

And if the rules do prompt a change in behavior of the Internet providers, Hastings says he’ll take action. “So in the long term we still need to figure out what it means and how that works out, but I think in short term it’s very likely that there is no change,” he said.

Getty Images Netflix CEO Reed Hastings

Getty Images
Netflix CEO Reed Hastings

International growth: No competition concerns

As for the “extensive” European expansion Netflix is planning for this year, Hastings wouldn’t reveal in which markets he’s planning to launch, but said the presence of rivals doesn’t pose a problem. “So there are a number of players in all the major markets and then the smaller markets. They are all doing good work. I think what we have seen with our success in the U.K. is that there can be very strong players like the BBC iPlayer, and Sky. And we can still build a very successful business,” Hastings said on the earnings call.

Big pricing changes = big opportunity

The last time Netflix changed its pricing—effectively doubling prices—it sent the stock on a downward spiral, but now the company sees nothing but opportunity in new pricing options: “We try to make our pricing as straightforward as possible, but it’s not clear that one price fits all. We added the four-screen program almost a year ago back in April of last year, and that’s met our expectations in terms of the family take rate. So I think we are justified, we are willing to take a slightly richer offering and realizing that that might be better for consumers and for us.”

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Higher cost concerns?

The company revealed its content costs will rise by about $700 million, thanks to all its deals for exclusive and original content, like its upcoming deal with Marvel. But in the U.S. at least, content costs are under control—with membership and revenue growing faster than content expenses, and margins on the rise.

—By CNBC’s Julia Boorstin. Follow her on Twitter: @JBoorstin.

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