Netflix: Blowing It, or Being Human?

Oh I have an opinion! But it's based on communication, not on business.

On the business side of things, they're doing exactly what they should be doing. It's strategic and it's smart. They'll win because of it (if they haven't done too much damage to their reputation).

But the way they're communicating (or not) with their customers is terrible, at best. First they announce the price change, which was clear the decision was made in a vacuum. Then they lose a million customers and their stock price plummets. So they have their CEO send an email that says he's sorry.

The problem? It was an I'm sorry, but email. And that doesn't count it. Either you explain the business decisions and stand by the way you've communicated them. Or you say you're sorry and that's it.

I've read Humanize (very good and review is coming) so, if I were to put this in the perspective of what you teach there, I'd give them a D grade. They're not human. They're reacting. And reacting is always bad, from a communication perspective.

I'm with Benson on this one. Netflix is/was just a distributor, not the manfacturer. When you are the distributor and your manufacturer gives you price increases, the only thing you can normally do is pass those along to end users to preserve margin. In this case, if there is a stroke of genius, it is in realizing that eliminating the physical portion of the product delivery gains some short-term margin advantage.

I think the move itself - the shift to a non-physical product, is smart. If they do this right, without losing more customers, and without totally screwing up however stock prices tie into this, they may have something here, though. And okay, the name sucks, but remember what we all thought about the iPad? My sister said "I hope Windows comes out with a tampon."

So like you, I think all of that will blow over with time, much like the adjustment to Facebook Timeline that's going to start happening over the next week or so.

What troubled me was the execution of both the apology and how I, as a customer, felt like an afterthought to the great plan. I didn't feel heard, I didn't and still don't feel like what *I* want matters. And for a long time, especially in the beginning of Netflix, I felt like ... I know it sounds ridiculous ... they were on my side, in this push for flexible viewing choices.

But over the last year or so, it's been a long, slow decline into mediocrity. So that apology was a last straw in a long string of snafus, for me, going back a long ways. It was like the last in a series of breakups with someone you're convinced is your soul mate. I mean, I went back to them to stream Starz, then they lost Sony films on Starz, then Starz altogether.

I kept finding reasons to stay, they kept taking those reasons away. Until finally I though, why do I love them again? Wait. I don't.

I have Netflix and Hulu and Amazon Video and every chanel Verizon FIOS offers. But I hardly ever watch cable- we have that for other family members. I watch Netflix, Hulu and Amazon Video on my Roku, and hook my iPod up to my TV with a different device. Without DVDs, I have no connection to the nostalgia of watching things that aren't available on streaming. And no reason to have Netflix.

It wasn't never about the price hike for me. So I switch to a lower priced plan, have fewer DVDs for the same amount of money, big deal. And I really thought it was me inside my little tech bubble having a hissy fit but seeing this issue apparently affect stock prices and reading through some of the comments on their blog... I worry for them, that they made the choice to turn left a little late, and like Micheal Scott will find technology driving them into a bleeping lake.

But. No truly great innovation of its time is ever initially met with a round of applause...

I don't think Netflix is blowing it. Something that people forget from time to time is that the studios have decided to turn the screws on Netflix - jacking up their contracts into the stratosphere. Netflix has to turn some of the increase on to the users, that's unfortunate but it's business. As for my family, the increase was something like $5 or $7 a month, roughly what I'd save by deciding to brew a pot of coffee and pass on Starbucks twice a month.

My bigger concern is that the movie studios are treating this much in the same way that the rotting music labels treated iTunes, and Napster before this. Instead of seeing the dollar signs that come with leaning into the curve as technology rushes towards them, they want to force these companies, and the consumers that use them, into a 20th century user model - buy the DVD/CD/Movie ticket/etc instead of providing additional digital content/letting people watch their content how they see fit instead. If the studios could work with Netflix, I'm sure they'd see more money - both in online viewership, and in purchases, much as the music industry has seen (regardless of the boogieman of "piracy")

;-)

Ooooh. Push-back! Sweet! Seriously, I really do value the challenging comments. It pushes my thinking more than the "this post is awesome" comments.

I will reiterate that I don't have a firm conclusion about whether what Netflix is doing is the "right" thing to do or not. But whether it's right or wrong, I'm clear on one thing: I'm not mad about it, which I guess puts me in the small minority. A lot of people are mad (including many of the above commenters, I think). It's personal. I think Bill your comments really nailed it for me. You said "Netflix = movies. Movies = Netflix."

Interestingly, I don't think Netflix sees it that way. And as I think about it, they have the right to disagree with you, Bill. I have written a lot over the past few years about clarity over control--that companies need to revisit their ideas about control and be open to change. And let consumers shape things more than they have in the past. Companies can't control their brand with perfect messaging or ram down our throats what THEY say we want.

On the other hand, we don't have the control either. This letting go of control thing is a two-way street. We don't get to demand what Netflix is. We can choose to use a different service, of course, and as I said, maybe Netflix will go down in flames with these moves. But the whole thing is a dance. Netflix gets to shape who they are, just like we consumers get to shape (but not control) who they are. It makes me think. What is my role as a consumer in shaping a brand? Or, as I think more broadly, what is my role as a line staffer in shaping my organization's culture? What if my company does something that conflicts with what I think the company either is or should be? How do I engage? Heck, what if my spouse turns out not to be the woman I thought she was or want her to be? What part of those scenarios do I control and what don't I control? How does my awareness of that affect my behavior choices?

For me this is not a binary question about whether Netflix is human or not human as an organization. But it's a good context for exploring what it means to be human, and as I said in the post, entertaining the idea that it might not look or feel like we thought it would.

I'll see what Jamie wants to say in response to all of your great comments, but my personal take is that this move by Netflix is total genius and like every other bold move they have made, people grumble for a while, then get used to it. To me this example is actually more about being courageous and making risky strategic moves than it is about transparency (Maggie I hadn't heard about that whole Facebook angle). And it has worked for them in the past (one word: Blockbuster?). DVDs will be completely obsolete soon, and when they are, this will just be another interesting twist in the story of a truly innovative company. I WISH associations would dump some old school business models, even at the risk of pissing off and losing some members, for bold moves that create better value later on. Jeff - you're the biggest proponent of business model innovation in the industry - I would have thought you of all people would see the big picture of this.

The comment that has stuck with me throughout this whole debacle is this: "Netflix is where I go to watch movies."

Not "Netflix is where I go to stream and Qwikster is where I go to DVD." But one single source. Movies = Netflix. Netflix = movies.

By splitting the company and (nearly) simultaneously raising prices, Netflix has sacrificed its brand, confused the customer, and created an unsupported set of new behavioral expectations.

Imagine your trusted membership organization amputating a key member benefit, then charging you double for what's left. I don't think that would fly without a lot of flack -- or feel very human/transparent/generous/honest, no matter who it's spun.

The whole this is a huge mess -- and a huge disappointment. It reinforces why people don't/shouldn't trust big brands, because the Netflix example shows them acting less than human (and a little bit shady). Bummer.

I've written about this--first, about the original change and communication:
http://kathylisiewicz.com/2011/07/13/netflix-how-n...

and then about the apology:
http://kathylisiewicz.com/2011/09/22/netflix-how-n...

And my overall impression is that Netflix has no idea what to say to its customers, and doesn't realize that they are not our only source of information about their business. They should have learned both by now.

I don't think they're "human." I think they're very bad at this kind of customer relations.

A truly "human" organization would not have destroyed the customer experience in an effort to solve its own business challenges. Splitting the streaming and DVD operations into two separate businesses might make things simpler for Netflix, but it creates new complexity and inconvenience for its customers, which is an equally valid reason for abandoning the company as the steep increases in pricing.

The apology delivered by Reed Hastings, the Netflix CEO, is widely regarded as ineffective because while Hastings took ownership for the initial communications failure, he failed to acknowledge the negative impact of the changes on his customers. From my vantage point, there isn't a great deal of courage to be found in the way either Netflix or Hastings has handled this situation.

My advice: consider using a different example going forward.

I agree with Maggie, I think they are trying to put a face to a bunch of botched business decisions and not being particularly forthcoming until after the changes are hitting.

In my mind, here's what I see -
-Netflix changes (doubles) pricing for streaming/DVD customers
-Netflix implements "locks" on accounts so families can now only have one stream at a time (although I hear they rescinded this and now you can have two)
-Netflix then announces the company split with Quickster
-Netflix announces Facebook integration (and all its associated privacy baggage).

If I were a Netflix customer (which I have not been for several years), I'd feel taken for a ride. The average joe (I'm thinking... my Mom, for instance) does not read the Netflix blog. She's pretty upset that now she has to pay twice as much. There's a number of issues with the pricing/business strategy here (i.e. $18/month is still amazing for what you get vs. Cable TV pricing), but that's another issue.

I don't think Netflix is acting human, they did not consider the customers reactions very well when making all of these business decisions, but instead made the decisions, let the cards fall, and then apologized. Maybe they have a bigger agenda that we don't quite understand yet but overall, they've done a good job of angering the whole world.

Or, perhaps, they are acting more human than most businesses by making bad decisions.... touche?

In the meantime, I will stick with my favorite form of entertainment. And that is... BOOKS! Much less drama there, and my library is FREE!

Garry

I agree, except for one thing: I think being human is also about transparency, and I found it telling that just a few days after his very folksy blog post/announcement, Reed Hastings spoke at the Facebook developers conference and announced that Netflix streaming will be coming to Facebook (except in the US, at least for now). That's pretty big news and has a potential pretty big impact on Netflix customers and involves huge privacy issues. I know he couldn't scoop that big announcement at F8 by mentioning it in his announcement/blog post, but it just soured the whole humanity angle for me a bit to have him appear to lay his cards on the table and tell us all how it really is and what went into the thinking behind splitting the two companies...but leave one huge card--Facebook--behind his back.

Only time will tell whether Netflix/Facebook happens in the US, but if it does it's likely to mirror the Spotify/Facebook partnership whereby you now need a Facebook account to register for/use Spotify and the user has little or no control over the auto-sharing of the songs they listen to. If people were pissed about Netflix's price changes and company split, that anger will only intensify to a huge degree if suddenly every streaming video they watch is shared automatically on Facebook.

I say be human, but don't use fake transparency as a tactic to win people over, then abuse that trust, or you may as well have not bothered in the first place.