Netflix has been reduced but not
On Monday, Reed Hastings, Netflix CEO, published on the blog of the popular Netflix online service for renting movies would not be breaking your DVDs by mail of the companies in its transmission business online. This was the third major announcement regarding Netflix changes in prices and offering services in four months.
As a BlackBerry and Bank of America, which recently received the wrath of disappointed customers, Netflix has been criticized tremendous over the past months. (Full disclosure:. Consulted with Netflix for about two years between 2003 and 2005)
While Netflix is taking a beating, with a market value in rapid decline, angry customers and negative media coverage, the announcement of Hastings actually signals the company's willingness to keep tinkering until the appropriate service. Is that the public company CEO is rarely willing to take a risk, making mistakes in public and keep trying new things. To do this, he deserves some credit.
Netflix raised its prices in response to the expected increase in prices of major studio content, the company believes that Netflix offers flagship DVD-out-in-a-time-plus-unlimited streaming content $ 9.99, impossible to follow. As a result, in July announced plans to split the DVD business and the business of transmission, charging $ 7.99 for each. Netflix strategy to make existing customers "DVD and streaming" to "DVD or streaming" and charge a premium for customers who want to stay with both.
The announcement was seen as an attempt to increase the price by 60%, without offering additional value and customer response was swift and negative. Since then, Netflix has been attacked from all sides of the lack of communication, poor product strategy and poor pricing decisions. In fact, their communication has been poor: first with the announcement of July, as misleading, and then the months of September and October the ads because they are focused on responding to the wrong problem, thinking that customers get angry because I did not know which of the two new options to choose from. In fact, customers were angry because they choose or are forced to pay more.
Hastings knows he needs to make the transition from old media subscribers (DVD) to new (streaming) and has been methodically preparing for the transition of several years. The problem was at the time and transition messaging, not the transition itself.
Many businesses have failed because they do not focus on the benefits they provide to their customers rather than the technology they use. Companies committed to the word processing trains, and typewriters were forced to consolidate or go bust as their technologies become obsolete and are not adapted. Instead, consumers spend their money on cars, computers and tablets. Netflix tried to make the transition and the process has been painful, but you can still succeed.
In subscription businesses, it is almost impossible to raise the price of a service without dramatically improve the offer. Since the initial announcement in July, Netflix has signed Pro offers streaming with several major studios such as Dreamworks, Epix (Lionsgate, MGM and Paramount), Animal Planet and Discovery Channel - a fact referred to Hastings in his latest blog. Netflix has been able to time the price increases with the announcement of significant new content streaming, consumers could have accepted the change.
Netflix is a great risk with its new business model and pricing structure. Hastings had a vision of where he wanted his company to go and made some mistakes trying to achieve that vision. Some of these errors seem to have been avoidable, especially in retrospect.
Despite my personal distaste at rising prices and the mixed messages, which continue to comply with Netflix CEO and brave to their (multiple) public apology, his speed in the development of a new service (Qwikster) and speed Qwikster cancellation when they saw the negative response. Hastings "not fast" and then adjusted and adjusted again, which can be painful. His willingness to move forward, even in the face of public criticism, is very rare among CEOs of public companies.
Netflix is still a "buy" in my book. He knows how to deliver video content across multiple channels. It seems to be moving in their study of offerings, and is willing to act quickly, admit mistakes and move on.
