Don’t Be Netflix

It’s not often that person can be so tone-deaf he sends his company on the wrong course. Unless that person is the chief executive of Netflix, someone who listened only to analysts, not to his audience.

Reed Hastings – who, in a typical instance of overhyped business-journalism myopia, was named businessperson of the year in 2011 by Fortune magazine – made so many wrong decisions and continues to believe in his own star power, that you wonder if Netflix will rebound from his moves.

First off, he decided to split the Netflix movie rental business into two – one an Internet-download company and the other the DVD-by-mail company that had been such a phenomenal success. According to a damning (but not damning enough) article in The New York Times a friend of Hastings told him that the plan to split the company in two was a terrible idea, adding that no one wants to deal with two accounts. Hastings ignored this advice, “believing that chief executive should discount what their friends say.”  Who gave him this information? This friend made sense – and this friend wasn’t saying “you’re a genius,” as so many friends of the rich and powerful say. This friend spoke the truth, and Hastings ignored it. Bad move.

The other nutty thing was increasing the price of the service dramatically over the summer, rather than incrementally.

These moves engendered bad will among the company’s subscribers, and now Netflix has 800,000 fewer subscribers than in the last quarter – the first decline in a while for the once-hot and supposedly prescient company.

What happened?

The person in charge thought he knew everything and didn’t listen to his audience. In fact, from the article, it seems that not only did Hastings not listen to his audience, he was kind of clueless about how things were being done in general. He was unsure whether these plans had been presented to customer focus groups, and if they had, what the groups had said. Now the CEO is supposed to let the little guys handle the stuff like that, but if you’re going to make a decision that affects millions of the customers you depend on for your company’s success, then perhaps you should listen to what the customers say.

Sure, Hastings said he’d messed up, in a public apology. But it rang false. The lack of transparency here seems more of an age of “me” values rather than the civic one we’re currently experiencing.

The internet will definitely provide a large customer stream. But people want choice. And they don’t want confusion. Another thing the CEO chose to ignore.

At a time when competition from other Internet providers is surging in this area – including powerful players Amazon and Apple – you’d think that a company that once prided itself on being attuned to its customers would have kept them happy by keeping things simple and straightforward.

Running a movie-subscription service may not seem like creating and marketing a book online. But the principles are similar: if you’re dealing with a customer base hungry for content, you should engage with them and listen to them.

Netflix seems to have forgotten that. No marketer, no author, no entrepreneur should.

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2 Responses to “Don’t Be Netflix”

  1. Anonymous October 26, 2011 at 11:42 am #

    When I heard about Hasting’s latest moves, I could almost hear the gunshot going off as he shot the company in the foot. I’ve heard a lot of grumblings on Facebook from displeased customers. It will be interesting to see the long term consequences of his “me” decision.

  2. Kirsten Nelson October 26, 2011 at 11:43 am #

    When I heard about Hasting’s changes I could almost hear the sound of gunshot in the distance as he shot Netflix in the foot. I’ve heard lots of grumblings of dissatisfied customers on Facebook and Twitter. It will be interesting to see the long term consequences of his “me” decision.

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