Rethinking Netflix
Greetings. Netflix is in the news today on the heels of a major price increase, a dramatic decision to break the company into two businesses, a rapid decline in its stock price and an amusingly self-serving, cover your butt 'apology' and marketing letter to its customers (see below). Or at least that's my take on the letter…though you might have a slightly more favorable impression of this communication from Reed Hastings–the company's brilliant Co-Founder and CEO.
But from my vantage point it seems as though this remarkable company just might have peaked and is now trying to maintain its brand and stock price on the backs of its devoted subscribers. The one thing that is clear is the rapid decline of its original DVD delivery business–a business model that crushed Blockbuster and other brick and mortar movie rental companies as it revolutionized the industry. In the process, Netflix earned a cult-like following of folks who sang its praises as they expanded their own movie viewing horizons in a world with nearly unlimited choices. All at a very reasonable price. And when the company added the option of streaming films, it gave its customers two great delivery options with one simple point of access.
Now, however, Netflix customers will have to deal with two distinct companies (and one distinctly higher price). "Qwikster"–the renamed and quickly dying mail delivery business, and "Netflix"–the future-focused streaming business will each have their own portals, their own offerings and separate prices (and bills) whether or not this is better for customers. And while Netflix says that it really cares about customers and is still serious about the delivery business–saying only that "Qwikster" refers to "fast delivery"–the new name seems to refer to how quickly they intend to disinvest in this line of business, how quickly they came up with such a trite and laughable name for it and how quickly they have turned their backs on the customers who built their company's success.
Times change very quickly and great businesses must make smart choices to remain relevant. And this might be another brilliant decision by the leaders at Netflix. But the most enduring companies base their decisions on the needs and aspirations of their customers. And in a market with new choices millions of Netflix customers are now voting with their feet and wallets.
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We win in business and in life when we continue paying attention to the marketplace. And when we never believe that our genius gives us the right to ignore those we have the privilege to serve.
Cheers!