Wow, it was really only June when I crowed about the strength and smarts of Netflix, and the winning bet they had placed on our future viewing habits. It sure seemed appropriate at the time. Not long after, Netflix launched into what should probably be called the Summer of Dumb, an astonishing progression of self-inflicted wounds that, for a time, they seemed compulsively unable to stop.
Netflix springs their new business model on customers
Big companies screw up all the time. Some of you Internet people might be too young to remember, but Jack in the Box made burgers that killed children. The difference is in how you own your mistakes, and Jack in the Box set the standard for how you do it:
Step 1) Own it. The company paid out massive settlements, and their CEO appeared in commercials acknowledging the horrendous mistake, and swore to earn back the trust of consumers.
Step 2) Back it up. Jack in the Box became an industry leader in safety and quality standards in their food preparation.
Step 3) Give us something else to think about. This step is more than a little devious, but as consumers we participate in it because it helps us move on. Soon after, the restaurant chain launched their long-running “Jack” ad series, featuring the ping-pong ball-headed “CEO” with the wry voice and the love of delivering good food at a good price. It was a new story, a new “face” for the tainted company, and it was entertaining. We officially had permission to give them another chance.
By comparison, Netflix not only created their own disaster, they made it worse in their efforts to address it. First, they raised prices. Unpleasant, but probably necessary because of their real success. Studios are indeed withholding streaming rights renewals out of panic, and charging higher prices for those rights. And the streaming-only service could be a viable independent business in the long run. For both those reasons, Netflix needed cashflow, and from the upper layers of the atmosphere, this move had to be made. But Netflix did nothing to lay the groundwork for the change, offered nothing to loyal customers to make the medicine go down, and then had the idiot chutzpah to try and position it as some kind of savings – which not even New Math could put over.
And you know something? Even at this point I was defending Netflix. It was a shock, but I could see down the road, and given the volume of viewing I do, it was still a hell of a bargain given the breadth of their DVD catalog. I could ding them for clumsiness but I didn’t actually feel abused.
But then came the apology. By which I mean, Netflix CEO Reed Hastings writing a long, middle-of-the-night e-mail to customers apologizing to us for the fact that we are too stupid to see what an awesome thing he did. No – really, his only fault was in failing to communicate it well enough to all us nimrods. And in the middle of this non-apology, he decided to spring yet another surprise on us – that DVDs would soon be shunted off the Netflix website entirely, forcing customers to create new profiles and queues at a separate website called Qwikster.
This rather nakedly revealed that he was setting up the new company to sell off when the time was ripe, and the name was worthy of mockery; and believe me the Internet got to work mocking. But it was the fact that you couldn’t even pretend this was anything but a giant, insulting inconvenience that was the masterstroke. John Cleese, who made an entire television program called How to Irritate People, could not have composed it better. It was like sending a Hallmark Card reading: “Sorry I crashed your car. It’s your fault for letting me drive. P.S. – I crapped in the glove box for no good reason.”
At least though, he earnestly assured, there would be no further price hikes.
And so the hole they were digging struck a cave, the stock price tumbled into it, and the scorned-nerd mob took up their slings and arrows.
Then things were quiet for a bit. I read announcements here and there that they were striking new streaming deals with the likes of Dreamworks Animation, and that wasn’t enough to dislodge the giant, smelly problem they had made but it was the kind of thing they needed to start doing in order to create a “Back to Business” vibe. The addition of video games to the mail service was a piece of good news that got buried but will get more notice. And then today, the announcement that the vaporous horror named Qwikster has been pre-emptively slain. Since a lot of groundwork had been laid for the split, this means kissing off that investment and probably putting any spin-off plans under wraps for awhile; which is fine – given the way we treat infrastructure in this country it’s going to be a few more years before the quality and penetration of a streaming-only Netflix delivered via high-speed Internet could actually be viable. But is the first Big announcement lately that hasn’t involved making things worse for the customers. And that matters.
Now, announcements about new streaming rights will work supportively in the background while “Netflix is trying to stop being so dumb” is in the foreground. “Reed” (still trying to be on a first-name basis with us like the hip web-business CEO he is), barely touched the plate of crow he was served, but at least their action (or rather, their decision not to take a previously-announced dumb action) spoke a little louder than words. And what’s funny is, our anger at the Qwikster move – which never actually happened – successfully siphoned a great deal of attention off the price hike. There’s some silver lining in that.
And Netflix is still in-production on their first original series; the debut of which should be splashy and interesting and lead to some articles about the company that aren’t exclusively about how much of their investors’ money they lit on fire this year.
This is not “A” or even “B” level crisis management, but one thing you have to say is that in the process of being so spectacularly clumsy, they pushed the bar so low it’s practically in the dirt. By the standard of their recent behavior, Netflix did something right today, and they will survive to do more if they’re willing to hand over the shovel.