Unfortunately, his apology was widely perceived as insincere. In the same post, he then explained the separation of the DVD and streaming businesses into two divisions with their own websites. For subscribers who enjoyed the ease of using Netflix, the change would have turned their experience into a burden.
Now, after several fumbles, it seems Netflix is listening. In a new blog post on Oct. 10, 2011, CEO Reed Hastings reversed course. “This means no change: one website, one account, one password… in other words, no Qwikster,” he wrote.
Soon we’ll know whether the reversal also grew out of investor concerns. Bloomberg News reporters Ronald Grover and Cliff Edwards quote George Askew, an analyst with Stifel Nicolaus in Washington, who wrote to investors: “The real cause of the strategy shift could be higher-than-expected customer churn rates in late September and early October.” Did many customers vote with their feet?
The company had earlier reported that of its subscribers, 9.8 million customers stream movies, 2.2 million order DVDs by mail and 12 million use both services. Although the home entertainment delivery trend clearly favors streaming, how many subscribers who use DVDs understand the inevitable direction of home entertainment?
As the CEO noted in September’s blog post: “But now I see that given the huge changes we have been recently making, I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both. It wouldn’t have changed the price increase, but it would have been the right thing to do.”
Takeaway: Today’s CEOs are also chief context officers. Doing a baseline survey before instituting major change will provide useful data about the audience and inform your communications strategy. They will tell you their thoughts about pricing during difficult economic times.
Many news stories last month poked fun at the hard-to-spell brand name selected by Netflix for its DVD division. Additionally, the associated Twitter account was already taken — seemingly a jackpot for the young owner, with considerable speculation on what selling the name to Netflix might net him. How quickly things change. I’m guessing the value of the Qwikster account plummeted with the Netflix reversal. Do you think the Qwikster account owner “made bank” as he hoped to do or was he still in negotiations as the news broke?
Many thanks to Michael C. Rael for the great photo via Flickr.
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