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Netflix: A Lesson In Communication and What Not to Do
Oh Netflix. What are we to do with you?
On one hand, we’re pleased that your CEO, Reed Hastings, apologized by saying he “messed up.”
On the other hand, we’re disturbed that you, by now, don’t understand the online world well enough to know you should have checked to see if the name you’ve chosen for your DVD business was available on the social networks.
Oh yes, it’s true. Not only have you chosen a name – Qwikster – that is a far cry from your brand, but the Twitter account is owned by a weed-smoking Elmo.
Granted, the Twitter account owner has changed the avatar since you announced your name, but he’s still cursing and talking about smoking pot and “doing” girls. And it’s pretty clear he’s not giving up his name to you.
On one hand, we like the humility.
On the other hand, it’s a little too late.
On one hand, we appreciate the explantion.
On the other hand, we would have respected you more if you’d told us two months ago that you were moving into the streaming business and saw a need for the future away from DVDs. But, like most business leaders, you didn’t have the cajones to say that…and you probably thought you were going to make a bunch of money on the DVD side of the business until they did go away. Perhaps you could learn a thing or two from Steve Jobs.
On one hand, we respect your honesty and transparency in telling us that your greatest fear has been that you “wouldn’t make the leap from success in DVDs to success in streaming.”
On the other hand, it seems perfectly timed because you just lost nearly 50 percent of your stock price. We’re not experts, but we think that’s a lot.
On one hand…
Oh forget it. We’re trying really hard to understand the communication strategy behind all of this, but we feel like it’s an “I’m sorry, but…” apology. First you hired actors when you launched in Canada, something entirely unnecessary because they wanted your service so badly.
Then you hiked your prices and alerted customers by an email that arrived in the middle of the night.
And now you’re apologizing, but trying to get us to understand your side of things with a huge explanation.
Guess what? We don’t care. We don’t care that you don’t see a future in DVDs. We don’t care that you’re fearful of leaving behind something you built your business around. We don’t care that it’s easier for YOU if you separate the two businesses. We don’t care that the businesses are already separate so it makes sense that we have to log in to two different places. We don’t really care that you raised your prices, but in how it was communicated.
All we care about is if we can get movies, when we want them, and how we want them. Which we would have told you, if you’d asked us…like you used to do.
The board room decision making is easy if you listen to the pundits that the streaming business will be bought by Amazon and the DVD business will be sold.
Netflix has been a study of what not to do in communicating with your customer base.
I can't believe they went so wrong in such a short space of time. I'm more concerned that they've split their brand and have lost major content partners at the same time. It's seems like they've really gone away from their strengths. On the other hand, perhaps they can make a turn around as there's still no real strong competitors yet.
I think the drop in the stock price is more due to emotion rather than numbers, so it may be a stock to watch if netflix can make a turnaround.
That's a lot of hands, Octopus Lady ;-)
This is a great case study for how not to do business. isn't it? Soooo many mistakes here, it's easy to lose count.
And, I looked at the tweets on the @qwikster account out of curiosity. I would be mortified it that faux pas had been mine. Probably would have packed it in and started a new career in retail. What a disaster!
WordsDoneWrite I looked at it, too, while I was writing this and had to kind of giggle. It's clearly some kid who is about to make a bunch of money.
The other terrible customer service/communications failure Netflix is guilty of is, what happens to the people who want to keep their online streaming and DVD package (or at least its equivalent)? Do they have to register two accounts for the same company? What a hassle that will be. I just really wish companies would stop thinking we cannot handle the truth and talk to us like we are people.
Anthony_Rodriguez From what I hear, they DO have to have two accounts. A huge pain, to be sure.
They just made room for Apple to grow another area. AppleTV will grow into a stronger market. AppleTV allows you to either rent or purchases moves & TV shows and stream them onto your TV or any Apple device (iPod, iPad, iPhone) without storing media on the device itself. We just recently got it...my kids love it!! They can watch movies or TV shows anywhere in the house if they don't want to watch the news or the history documentary Dad has on!
Seems like a prime time for another company to compete with Netflix, say Blockbuster trying to revive themselves or Red Box..
ginidietrichcmjohns Go for it Ladies!!! I've got my own reason for seeing Red Box get shook up.
ginidietrichcmjohns Oops, may have goofed. I assumed that cmjohns is a lady based on the way the avatar looks. Hope I haven't offended.
ginidietrich@cmjohsn maybe you both could partner with the weed-smoking Elmo as he is an already established brand.
Trying to look at this whole thing (and your post) critically, it seems that the only real mistake made here was Netflix not looking into this Twitter handle thing. And that will surely resolve itself- either it will work something out to get the handle or will use an alternate until it does.
So while some are upset at the moment, I'm betting on Netflix to come out on top in the long-term.
Looking at the communications side: the mistake was not being contrite in the initial communication. After a week or two passed with no follow up, the majority of the damage was done. My guess as to why there hasn't been much (any) communication since is that the company was trying to work out the logistics of splitting the business. And you acknowledge that this latest apology was a good communications move that showed humility that offered transparency and a depth in explanation.
So all good there, right?
From a strategic standpoint, I don't think that Netflix is abandoning DVDs. DVDs aren't going to go anywhere in the short-term (and I'm talking years here.) What Netflix is doing is acknowledging that these are two different businesses and they need to be operated as such. It's smart and showing a lot of foresight.
Completely disagree, and believe Gini is spot on. I too have tried to look at the situation dispassionately and objectively myself and it's hard for me, even outside my capacity as a business owner, to see how any of these three results are an improvement, or nothing to worry about:
a- angering and even alienating quite a bit of your customer base, apparently enough to
b- have your stock price drop by half, and to follow up with a message that
c- re-ignites or worsens the earlier customer dissatisfaction issues that may have dissipated over time. jasonarican .
Tinu
-People were angry because of an admittedly hefty 60% price increase. That said, I don't think that people realized just how good they actually had it. Unlimited streaming and 1 DVD is a steal at $7.99/mo and was clearly not sustainable. So while people were mad, yes... it was a bullet that Netflix had to bite right now in order to continue to operate and grow as a company.
-the drop in stock price is pretty bad, I agree. Again, I think Netflix is absorbing some short-term losses here that it can make up in the future. This is a good post that talks about that: s.hbr.org/mUHmt6
-To your last point, Reed apologized for how the situation was initially handled and did a fantastic job of doing what we said lacked in the first communication: a better explanation of the decision.
I applaud Netflix for being more transparent and appreciate a valuable lesson in business and innovation that we are watching unfold before our eyes.
Now I could of course be wrong here, that's what a bet is all about. But I'm betting that Netflix (and Qwikster) will weather this storm and be the number 1 example of a company that was able to innovate ahead of declining market and business model.
You may not be wrong about them weathering the storm, that's not where I disagree with you. I just think it will be more out of no other option existing than anything close to innovation. jasonarican
P.S. I thought that this article a "streaming war" was interesting
http://money.cnn.com/2011/09/19/technology/netflix_cash/
I want to hurt whoever came up with the name Qwikster.
Why didn't they go with the obvious Mailflix?
That explains it. Maybe one day they'll realize their stupidity, hire me, and I can quit blogging for cash.
ginidietrich Cat products and iPads, of course.
ginidietrich My new in-person consulting and speaking business, Jayster, has a rate is one 32gb iPad an hour.
My online presence, still known as Jay Dolan, author of The Anti-Social Media, will have a rate of one bag of cat food (my cat's choice) per hour.
JayDolan You'll have more iPads than you know what to do with after one day. What will you do with them? Sell them on the black market?
ginidietrich Yes. Or make a house that covered entirely in iPads on every surface.
Love this Gini! I was thinking so much of the same thing when I heard the story. This is so true!!!!!!
janbeery So true it's worth six exclamation points. :) BTW. I was looking through Katie's photos on FB this morning. Why can't I find any of you at the wedding?
I think the avatar is actually very appropriate for Netflix these days ;)
jackielamp I thought the avatar was hilarious...mostly because you know people are getting Spin Sucks in their email and thinking WTH is Gini doing?
I've been waiting for someone to explain to me, succinctly, what the Hell was going on at Netflix. I admit my sometimes-too-logical brain was utterly confoozed. Thank you. It really was as stupid as I feared.
Doesn't anyone in the glittery-shiny online world think about strategy? (that is, now that Steve Jobs has gone). Doug the Dog from "Up" could run many of these companies about as effectively, at least until they ... SQUIRREL!
This was a classic post Gini! Having worked with some Netflix competitors it was especially entertaining:). Besides their transparency in the whole "situation", I agree there wasn't too much strategy or thought behind their actions. I suppose we'll wait and see. Thanks for the entertaining post!
StoryAssistant Thanks Matt! I started writing and then it didn't stop with just two hands. :)
Netflix did announce that there would be a change in pricing structure over the summer (June or July maybe?). Plus, as stupid as this all is, look all the commotion it is causing. Which would be worse: Netflix creating a new brand and not having anyone catch on to it or the alternative which is now that most people on the Internet know what Qwikster is, whether it be in jest or not.
I, for one, will continue using Netflix's DVD option because I have no other options and it's cheap. I will only switch to streaming when they are able to offer me the same selection of films over the Internet.
The best part of all this is that that kid who owns the Qwikster handle is probably going to get PAID, big time. And I wonder what that $ will go towards?
e.adam.quinn Yes, they did and we blogged about it then because it was a huge communicate mishap. The reason I blogged about it today is for the same reason: This is a communication blog and they're not doing it right. They lost a million subscribers and their stock price is down 50%. Even though you and I may still use their service, there are a million people who told them to screw off.
I wish I could tell them to screw off. I just don't know where I can go for alternative service?
e.adam.quinn Nowhere yet. Amazon sounds like they'll be competing soon, but they're not there yet.
As to you other point about the kid with the Twitter handle...how much do you think he's going to make from it?!
ginidietrich He Tweeted something about 1,000 dollars last night but who knows. It is amusing to follow him. I'd expect a bigger backlash when he announces how much they are paying him and they are accused of supporting drug use or whatever that kid is into.
e.adam.quinn $1,000?!? Clearly someone needs to talk to the kid. I'm willing to bet he can get more. And he's clearly a kid. We all did stupid things as kids. Well, I did anyway.
ginidietriche.adam.quinn I do stupid things every day. :)
I was one of those million, mostly because the streaming content didn't seem to like my backwoods DSL connection very much (lots of buffering and signal cutting out), plus the lack of content on the streaming side made it not as appealing anymore. That lack of content makes me wonder about the timing of their decision to split the DVD and streaming businesses now, rather than wait until they have a more complete library of streaming options. Plus, Qwikster? Is that really the best name they could come up with? Maybe they failed to notice the handle wasn't available on Twitter because they were more concerned with making a splash on Friendster instead.
Conversation from Twitter
jburdadams Or thank. :)
jburdadams And than YOU for the RT!
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