Netflix Executive’s Apology Lacking

23 Sep

Netflix executives and marketers should have done a little more homework before dividing the Netflix company into two businesses. Netflix will remain as the company’s streaming entity, and Qwikster is the new name for the DVD-by-mail service.

Netflix exec Reed Hastings sent out letters to his subscribers apologizing for the way the recent price hikes and subscription changes were handled. His letter, addressed to subscribers individually, starts: “I messed up. I owe you an explanation.”

It always amazes me that corporate giants love to make changes and genuinely believe we, the little guys, aren’t smart enough to know what’s going on when they try to go “under the radar” with the changes. This week’s Netflix story, however, just gets funnier and funnier.

It seems a little known young soccer enthusiast named Jason Castillo owns the Twitter online moniker of Qwikster. A post by David Pogue says “It didn’t take long for astonished Internet citizens to discover the Twitter name @qwikster is already taken – by a rather foul-mouthed young man.”

Pogue also quoted some of the email comments he received about Netflix’s news. What seems to grate on most is Netflix’s Hastings offers an apology for the way the news was delivered but not for the increase in pricing and the splitting of the company.  In a matter of weeks after the price increase, one million furious Netflix subscribers canceled.

“In the end, though,” Pogue writes, “what makes me unhappiest is how calculated all of this feels. In July, a spokesman told me that Netflix had already taken the subscriber defection into account in its financial forecasts. And sure enough. When I tweeted that Netflix had lost one million of its 25 million customers, @npe9 nailed it when he wrote: ‘It damages their brand and images, but 24 million customers paying $16 is still better than 25 million @ $10. Increases revenue by >50%.’ ”

A post from The New York Times post late last week said Netflix shares fell 15 percent after the one- million hiatus. The post also talked about Hastings’ lack of apology for increasing subscription rates in his apology letter. Instead, the post continued, “he blamed his own ‘arrogance based upon past success’ for a failure to communicate in the face of a fast-changing business model.”

With today’s technology, though, and judging by the number of blog posts, Tweets, and other digital notes, at least Netflix/Qwikster is hearing loud and clear what we think about the way it conducts its business. I like how Pogue finishes his post:

“Yes, Mr. Hastings, you did mess up.

Twice.”

-Sheila

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