Netflix CEO Admits Mistake: Will Reed Hastings Regain Your Trust?
By Rob Scott
September 19, 2011
September 19, 2011
- On Friday, ETCentric provided an update to recent stock activity based on the negative customer reaction to Netflix splitting its services. The company cut its domestic subscriber forecast by 1 million, suggesting it no longer expects growth for its U.S. customer base this quarter. “News of the 4 percent cut in its subscriber outlook knocked 16 percent off Netflix’s share price, sending the stock to its lowest levels in 2011,” reported The Wall Street Journal. “Netflix, though, continued to defend its recent pricing change.”
- Shortly after, ETCentric staffer Phil Lelyveld submitted a paidContent report that put the stock decline at nearly 19 percent and suggested “the honeymoon period with Netflix may be over.” The article includes a compelling visual that illustrates consumer viewing habits. According to Phil: “The most interesting part of this story is the chart. The chart breaks down how consumers acquire the movies that they watch, and how often they acquire them.”
- Yesterday, Netflix CEO and co-founder Reed Hastings responded to his subscribers via a blog post, that started with “I messed up. I owe everyone an explanation.” ETCentric staffer Dennis Kuba was quick to publish the news: “Hastings explains his reasoning for a decision to create separate DVD and streaming businesses and websites. His customers react negatively to his blog posting (see more than 600 comments following Hastings’ post).”
- “We feel we need to focus on rapid improvement as streaming technology and the market evolve, without having to maintain compatibility with our DVD by mail service,” writes Hastings on the Netflix blog. “So we realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently.”
- According to Hastings, the new DVD business will be named “Qwikster” and will add a video game upgrade when it launches in a few weeks.
- “A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated,” he explains. “So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places. Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice-versa.”
- Hastings concluded: “Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.”
Topics: Dennis Kuba, Movie, Netflix, Phil Lelyveld, Qwikster, Reed Hastings, Streaming, TV, Video, VOD
8 Comments
Here’s a video apology and explanation from Reed Hastings:
http://youtu.be/c8Tn8n5CIPk
Here’s a video apology and explanation from Reed Hastings:
http://youtu.be/c8Tn8n5CIPk
As a Netflix subscriber, I received a version of Hastings’ message via email this morning. As someone who joins the throngs aggravated by the price hike, I have to say I’m torn on this issue. In a perfect world, I would switch my sub to streaming-only (but of course, the current selection of streaming titles is extremely limited). That being said, my last two DVDs from Netflix were damaged and could not be played in their entirety. I guess I’ll need to consider other online services…
As a Netflix subscriber, I received a version of Hastings’ message via email this morning. As someone who joins the throngs aggravated by the price hike, I have to say I’m torn on this issue. In a perfect world, I would switch my sub to streaming-only (but of course, the current selection of streaming titles is extremely limited). That being said, my last two DVDs from Netflix were damaged and could not be played in their entirety. I guess I’ll need to consider other online services…
Agree with Rob, that streaming is preferable, but the inventory just isn’t there. As for the bigger picture, this is a scathing object lesson for all content providers as to the mercurial nature of consumers, and how with very rare exception, there is always another place they can take their business. In a commodity market, does customer loyalty exist? Should it?
Agree with Rob, that streaming is preferable, but the inventory just isn’t there. As for the bigger picture, this is a scathing object lesson for all content providers as to the mercurial nature of consumers, and how with very rare exception, there is always another place they can take their business. In a commodity market, does customer loyalty exist? Should it?
I believe that loyalty exists (on varying levels), but also believe competition breeds better options. BTW, I really enjoyed Linda Holmes’ take on NPR’s Monkey See blog: “It’s like a shoe company deciding to sell right shoes and left shoes for 12 dollars each where pairs of shoes used to be 20 dollars and thinking that consumers will notice the lower 12-dollar price but not the fact that it buys only one shoe.”
I believe that loyalty exists (on varying levels), but also believe competition breeds better options. BTW, I really enjoyed Linda Holmes’ take on NPR’s Monkey See blog: “It’s like a shoe company deciding to sell right shoes and left shoes for 12 dollars each where pairs of shoes used to be 20 dollars and thinking that consumers will notice the lower 12-dollar price but not the fact that it buys only one shoe.”
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