Netflix: The Company That Can’t Make Up Its Mind

Lori GrimOh, Netflix. Poor confused Netflix. I was a fan and I even supported the Netflix/Qwikster decision. But now you’ve lost me. You’ve become a little too unpredictable for my liking.
If you’re not following what I’m talking about, here’s a little bit of background. Back in August, the movie rental/streaming service angered its customers by raising the prices on subscription plans that included both digital streaming and DVD rentals. Less than a month later, the company announced that it planned to launch a new company, Qwikster, which would handle the DVD rental business while Netflix continued to manage digital movie streaming. Reaction from customers, as well as the media was almost resoundingly negative, although the decision had some supporters – including myself – who pointed out that Netflix’s focus on its streaming service left it well-positioned for success in an increasingly competitive field.

If the decision to split the company in two seemed a bit sudden, especially after the pricing controversy from just a month earlier, Netflix CEO Reed Hastings didn’t seem to mind. As he said in a blog post: “Companies rarely die from moving too fast, and they frequently die from moving too slowly.” However, he left open the possibility that the whole thing could be a big mistake, writing later in the blog: “It is possible we are moving too fast – it is hard to say.”

Apparently, Netflix moved too fast: the company announced today that it would remain one company that handled both streaming and DVD rental. Customers are relieved that they will no longer have to manage two separate accounts and analysts are applauding the decision, citing Netflix’s willingness to listen to customers and do what is necessary to repair the relationship with them.

On one hand, I’m impressed by Netflix’s ability to move so quickly. The company split into two companies and then merged back into one in the span of about two weeks. I’ve worked in environments where it has taken that long to get a manager’s signature on an invoice. But it appears that Mr. Hastings was right about one thing: the company did move too fast.

Reed Hastings is a notoriously brash CEO and his creativity and bold decision-making are apparent in the company’s success. No matter how brilliant and successful a CEO may be, though, the customer must have a critical voice in a company’s decisions and it’s clear that, until now, the Netflix customer’s voice was lost in the company’s decision-making process. The company forged ahead in the face of resounding criticism from customers with plans that may have looked attractive on a spreadsheet but that, ultimately, alienated subscribers.

Netflix did the right thing by finally listening to its customers and returning to the simple business model that helped to make it a success in the first place. The company’s willingness and ability to move quickly will help it to recover from this debacle. Moving forward, though, Netflix must make customer satisfaction a priority and not assume that customers will be dazzled by its CEO’s brilliant business decisions. If a business makes a change in direction and the benefit isn’t immediately clear to the customer – or if, as in the case of Netflix, there isn’t even a benefit to be had – the company has to seriously consider if the new move is worth it.

So what do you think? Can Netflix recover from the events of the past month? How can the company demonstrate that it values customer feedback? Do you have a similar experience or lesson to share?

2 Comments

  1. Void
    Posted October 15, 2011 at 8:24 pm | Permalink

    Just saw ur post…We had both DVD and streaming. Dropped DVD. May add it back on. Its still the best value that’s out there. No other option comes close…

  2. Lori Grim
    Posted October 17, 2011 at 10:41 am | Permalink

    I agree. When Netflix raised its prices on streaming + DVD rental plans, I couldn’t understand why everyone got so upset. Of course, nobody likes paying more money for anything but even at the increased rates, Netflix is a great value. I took three months’ worth of my Netflix usage and priced what it would have cost me to get that same content from other sources – RedBox, iTunes store, streaming over cable, etc. – and the difference was huge! And in some cases, I couldn’t even find the content I was looking for in other places. So, yeah, Netflix is great and a great value.


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