If Netflix has done anything right in the past few months, it is how to turn a seemingly trust- worthy brand into public corporate enemy number one. If this is the kind of ungraceful bowing out you’d like for your company, take these queues from the DVD service (pun intended).
1. Change your rates, but don’t notify your customers.
Nobody likes when prices go up, especially a spiked increase as high as 60 percent.
Nobody likes to be uninformed of monthly subscription rates increasing, especially when automatic bill pay is set up.
And nobody likes bank overdraft fees, especially when ovedrafted by only $3, because you were uninformed of a 60 percent price increase of your monthly subscription rate and had automatic bill pay set up.
2. Separate your services, but don’t consult your customers.
Was there a demand for two separate services? Was there a problem, a request from customers, complaints from those only subscribed to one service to prompt the split?
I didn’t notice one. As a member of Netflix and a subscriber to both DVD and streaming services for several years (although in light of recent happenings I am only streaming), there was not an apparent reason for dramatic changes. In fact, I still didn’t know until I started writing this blog and sought financial advice (see #6).
3. Ignore your plummeting customer base
Netflix, who reported gaining 400,000 new customers in the current quarter, stands to lose 600,000 next quarter. The company that had predicted having 25 million users in America is now expected to have 24 million. One million is still a lot of people, but Netflix CEO Reed Hastings insists revenue and earnings will not be affected. Read: Hastings does not care about a measly four percent of his customers. Maybe he should, since the anti-Qwikster page on Facebook quickly had more fans as the actual, yet recently MIA Qwikster page.
4. Create a new brand without finding out what it is already associated with.
In Netflix’s case, it was the name of their new segregated DVD service Qwikster already in use on twitter by a starry-eyed Elmo smokin’ a doobie. One very lucky stoner with extremely poor grammar has been thrust in the spotlight, and while he stands to make a pretty penny by selling his handle, he has yet to turn it over.
5. Be delayed in your response and untimely in a public apology.
Netflix offered “An Explanation and Some Reflections” on their blog in which Hastings admits in the second sentence that “it is clear from the feedback over the past two months” – wait. Stop there. Two months? In a world of real-time news, two months is a very long time. News from two months ago has already been archived.
As far as being an apology for “the lack of respect” the company has given its members, “sorry,” “regrets,” “humbled,” and “mistake” never make an appearance. The word “apology” shows up once, but only in reference to those who still subscribe to the service. I suppose an explanation is not the same as an apology, so maybe we are still waiting for one.
6. Watch your stocks fall.
I’m not one for numbers, nor am I fluent in Wall Street jargon, but I’m pretty sure Netflix is hurting. I chatted with my financial advisor friend, Salar Naini, about his thoughts on the matter from the businessman’s perspective:
“From a business standpoint is makes total sense. Reed Hastings realized he didn't want the DVD service to drag down the future that was streaming and he wanted to get rid of it on his crusade to establish Netflix as ‘The Streaming International Service.’ He figures he will separate the companies and that way when the DVD becomes obsolete he can sell off that asset and continues pushing streaming forward.”
Ah. So does this mean we should all stop whining and those who are invested in Netflix shouldn’t worry?
“The stock has dropped tremendously since its $304.79 high. (Closed at $133.19 on 9/29) What Hastings didn't factor in was how much customer loyalty he was losing and the fact that his approach could forever tarnish the Netflix name. Google and Apple both are rumored to be introducing similar services. With both companies’ reputations of perfecting old technology and services….well, I can’t give you a recommendation (on this blog), but people should contact their advisors before making any major decisions.”
See, even finance people realize the importance of protecting your brand’s reputation.
7. Lose important contracts that attract members.
Starz Entertainment, a significant source of Netflix’s content, did not renew its contract with the streaming service. Without Starz, customers will not be able to stream movies from Walt Disney, Columbia, Touchstone and Sony. Ouch.
8. Strike up a deal with a major production company, but don’t offer major productions.
In light of losing Starz, Netflix signed a contract with DreamWorks Animation that will allow the streaming of their movies. However, big named titles like Shrek and Kung Fu Panda will not be offered until 2013, leaving us with hits like Sinbad: Legend of the Seven Seas.
9. Don’t offer a solution.
As a former subscriber to both DVD and streaming services, and now a subscriber to only streaming, I certainly haven’t been offered any remedy to fill the void left in my DVD player. I’ll gladly accept any offers (you listening, Redbox?)
10. Let your arch nemesis rise from your ashes.
Netflix has provided Blockbuster with more than enough reasons to hold a bit of a grudge. Although Blockbuster may have closed its doors on hundreds stores, there seems to be a new opportunity for DVD delivery and streaming services, one that is perfect for a familiar and trusted brand. Starting October 1st, Blockbuster’s streaming and DVD service will be available for Dish Network users, perhaps foreshadowing the future of streaming services teaming up with cable providers.