Netflix CEO Reed Hastings should be applauded, I suppose, for trying to communicate with his customers directly -- apparently in an attempt to add the personal touch. But he's no good at it, and he should never do it again.
On Sunday, Hastings posted what was ostensibly an "apology" for the company's handling of the decision in July to revamp the Netflix's billing, in effect raising monthly fees by 60 percent for people who wanted access to both streaming video and DVDs by mail. The backlash was loud and sustained, even though prices were still remarkably low given what customers got in return -- basically unlimited access to videos for just $16 a month. Part of the problem was that Netflix didn't explain its actions in a way that might have placated customers.
Sunday's missive was even worse.
Besides being an apology, it was also an announcement that Netflix would
further cement the DVD/streaming split by cleaving the company in two. A
new, separate, wholly owned company called Qwikster will handle DVD
rentals, while Netflix will handle the streaming.
some sense. Streaming is the future of video rental (though it might be
some time before it eclipses DVDs, which makes the plan risky at least in the short term
Hastings has good business reasons for doing what he's doing, but
rather than clearly explain what those reasons are, Hastings basically
laid down a lot of vague bullshit.
Hastings wrote that he
"messed up," in July, when the pricing changes were announced. "I owe
everyone an explanation" for splitting the DVD business from the
streaming business, and charging more to people who want both, he said.
Sadly, though, he didn't explain it, then or now.
"It is clear from the feedback over the past two months that many members felt we lacked respect and humility," he wrote.
that wasn't really it. What really happened was that prices went up,
without a concurrent improvement in service (there was, if anything, a
reduction in service), and people were pissed. The company lacked
respect, all right, but what it mostly lacked, and still lacks, is
Netflix's costs for acquiring video from media companies
for streaming are going up -- and may soon skyrocket. (Because of a
quirk of copyright law, costs for acquiring DVDs will stay about the
same). Hastings doesn't really get into this, he just talks about how
the "cost structures" of the two businesses are different, as if
customers gave a rat's ass about Netflix's internal business strategies.
customers do care about is their ability to watch videos as
conveniently and cheaply as possible. On this, Hastings gave them
nothing. All he did was announce that the company was doubling down on
the decision that pissed everybody off in the first place, and, oh, by
the way, he's sorry about how they announced it.
All customers got from Netflix was this apology and partial explanation of
internal strategies. Not surprisingly, this has not gone over well.
whole "personal touch from the CEO" thing is fine, but only if the CEO
is honest and clear, and if he or she truly puts the customer first. In
the absence of this skill on the part of Hastings -- who otherwise seems
like a smart, able guy -- Netflix should just let its PR department lay
down the bullshit, like most companies do. After all, that's it's there
for.Dan Mitchell has written for Fortune, The New York Times,
National Public Radio, The Chicago Tribune, and many others.
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