Friday, September 23

Saying Sorry: Netflix Actions Still Speak Louder

When the Netflix fiasco started in July, we pointed out that Netflix doesn't want to be in the DVD shopping and shipping business anymore. Back then, the price increases alone were enough to convince anyone. But we pointed out CEO Reed Hastings had said as much, several times over.

We also mentioned that Netflix wasn't done surprising customers. The company's long-term goals include moving streaming subscribers from household accounts to individual accounts, thereby doubling or tripling or quadrupling their rates when it "feels more natural."

But CEO Reed Hastings doesn't want to talk about that. He wants to talk about Qwikster

Qwikster is the new business that Netflix is spinning off to handle the DVD shopping and shipping business. The companies will not be integrated. Qwikster will have a new website. Qwikster will have new reviews. Qwikster will be billed separately on your charge card.

The real oddity, however, is how the entire announcement is framed up. Hastings nearly apologizes for not communicating one change, and then goes on to share all the changes they haven't communicated, again. Even the ending he wrote was off the reservation: "Actions speak louder than words. But words help people understand actions."

Sometimes that is true. But there is another line of logic left out of the equation. You can understand the actions, but it doesn't make the actions right. Most people learn that in kindergarten, such as the first time they play a prank on a classmate. Understand or not, a second black eye is hard to forget.

Communicating change is easy. Hastings chooses to makes it hard. 

Given that the first fiasco cost the company about one million of its 25 million subscribers, one would think that Hastings would have rolled the split, perhaps reducing the subscription rate of one of them.

Some customers might have seen him as a hero. It would have also carried a "we heard you" statement,  which would have helped the company sell the split. Ergo, we found a way to reduce rates and that requires us to offer both services under two different companies. The fallout might have been minor. But instead, their communication with customers looks a little bit more like this ...

At minimum, any other approach would not have overshadowed the upcoming Neflix-Facebook integration. And one would assume that it would be the communication Netflix wants people to see. Certainly it would have been better than the nightmare someone dreamed up.

Companies don't have to listen to customers. Sure, that's true. 

Bruce Temkin takes a very even-handed approach on the Netflix affair (hat tip: Geoff Livingston), even if he might be wrong that the move won't cost more customers. At minimum, it will prompt what Hastings wants many of them to do anyway — drop DVD all together and split households into individual accounts (something the new Facebook service can help them do). And then what?

It's hard to say. Streaming services are not like the original Netflix model. It's an increasingly crowded space that promises more competitors than the space that used to be the core service of the company. And without DVD shipping, Netflix doesn't just lose its value proposition. It leaves the doors open.

Still, for now, it is Hastings' call. Much like the recent changes to Facebook, company owners call the shots. Customers do not have to be part of the equation. All they can do is vote with their feet. And sometimes other companies will jump all over the opportunity to help them along, right out the door.

I understand what Hastings wants to do. I really do. He could probably accomplish it too, even if some of it feels a bit sleazy. But as it stands today, delivering excuses and calling them explanations is undermining the company's ability to accomplish anything it wants to do. It might even bury it faster.

Related Articles. 

The Netflix Apology: Good Idea, Bad Execution  by Patricio Robles

Parsing Netflix's Apology by David Pogue

Netflix Says It's Sorry, Then Creates New Uproar by Michael Liedtke
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