Netflix: A Mea Culpa – but WTF?


Netflix just turned a drama into a crisis.

After their CEO, Reed Hastings heretofore a well-respected entrepreneur, apologized for almost doubling the price of subscription, Netflix went on to announce that they will complexify your life.

They are splitting their streaming and DVD mail rental services into two businesses.

So now, not only do you pay more, but you also have the pleasure of going to two separate websites to make your transactions with the firm – oh and by the way, you’ll be receiving two separate bills.

To cap it all off, the DVD service will be called “Qwikster”.

No, I’m not kidding.

We all know the future of content is moving online, but this seems like a text book case “brandicide” to borrow a term from Simon Williams, CEO of Sterling Brands.

With 24 million subscribers (1 million ‘early defectors’ left after the disastrous price hike), Netflix has what could be modestly described as a ‘user base’. Instead of rewarding their loyalty and deepening their relationship with their customers, Netflix has chosen, de facto, to alienate them.

Interestingly, over 10 million of their subscribers are ‘hybrid’ subscribers suggesting they are seeing the value of both analog and digital access to their content.

Time will tell if Hastings’ “gutsy” decision, as reported by the Wall Street Journal, is a masterstroke of genius visioneering or not, but for the time-being, it’s a terrific strategy for shrinking a business.

All of this leads me to three simple rules to avoid shrinking your business:

1. Don’t screw your customers – it’s called building trust

2. Make people’s lives easier, not harder – it’s called providing service

3. Add value to create value – it’s called innovation

One final thought: I have always thought Netflix was a terrific 21st century brand name – but apparently, the powers that be at Netflix don’t concur. Building one strong brand is hard, building two is really, really hard, not to mention really, really expensive.

This news may be the first ray of light Blockbuster has seen in a decade.

Alpa Pandya, EVP Managing Director- Strategy

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