How does a company, within a span of couple months, go from being one of the most loved to most-loathed? Here’s how:
1. Announce a 60% price hike for customers
2. Fail to communicate it clearly and fail to explain the rationale behind it
3. Few weeks later, bring out an apologetic statement from the CEO announcing re-branding and spin off (of DVD business) under a name like Qwikster that reminds one of companies destined to be sold off
4. Still fail to address price hikes
What’s the future?
Notwithstanding the list above, allow me to say that in the long term, this move might be the right one for the company’s future. How well is Netflix able to keep its customers happy on the way, is another story. I know the mistakes made are huge and Netflix is risking loss of trust and goodwill in the market (stock has dropped rapidly over the last 3 days), but CEO Reed Hastings makes this move, I think, because he believes what I believe- physical media will rapidly be replaced by digital media in the coming years. I had written this article when Netflix initially announced its price hike. And I reiterate what I said then- that shiny discs will soon be obsolete and we will all be watching more and more streaming content in the next few years.
Qwikster’s troubles
Back to the problems, the new baby Qwikster is born with a whole set of issues. Customers already mad about the price hike are going-“You think spinning off DVD business under a different name is going to make me happy? I am still mad about paying more money.” And only after the announcement, did the company realize that there is already a Twitter handle by that name and it is owned by a pot-smoking, foul-mouthed teenager. Treating social media as an afterthought in this day and age, spells disaster.
Steve Jobs will show you how
The way things are going, I am not sure Netflix is equipped to handle this huge strategic move in a manner that eases its transition into a streaming content provider. Remember Steve Jobs giving his presentation when there were some issues with IPhone 4?
I admit the problems facing Netflix and Apple are completely different but I state this as an example- that being transparent and open with your customers helps the company when things are not going well. Obfuscating facts and springing surprises (unpleasant ones) does not bode well. What Jobs did with this presentation, was he showed people that he knows there is a problem, he laid out a plan to address concerns and ultimately demonstrated to his customers that he is listening. Sadly, Reed Hastings seems to have already lost that opportunity. All said and done, Netflix, although on the right path in the long term, will have to make up for all the bad PR moves by embarking on an extensive damage control mission. Hopefully, they get it right the next time around.