Reed Hastings And Netflix Seem To Understand ... Four Months Later
Netflix CEO Reed Hastings was born and raised in Boston, Massachusetts, and over the past four months he has proven a worthy successor to ultimate Beantown goat Bill Buckner. From the announcement of the infamous price hike, to his non-apology, to the launch and subsequent un-launch of Qwikster, Hastings has repeatedly let the ball go through his legs on the world's largest stage, as competitors like Amazon Prime, Redbox and Blockbuster run around third base celebrating wildly at his miscues:
Since 1986, however, former Red Sox first basemen Bill Buckner has been vindicated, by two Sawks World Series victories and an unforgettable episode of Curb Your Enthusiasm; Hastings, meanwhile, remains a Boston boob. He has been painted by the media and by outraged, flabbergasted Netflix users as greedy, clueless and unsympathetic to his customers. Four months ago, Reed Hastings was the semi-anonymous head of one of the most well-respected American companies on the Internet; now, he was most recently demolished by a Saturday Night Live sketch that played up his total incompetence as CEO.
But along with the revealing of 800,000 lost subscribers in the past three months, Hastings penned a letter to investors that finally--finally!--indicated that he just might not be so ignorant of why his customers are so angry with him. Proving his hindsight is indeed 20/20, again and again he succinctly nailed Netflix's current dilemma and how he and his team screwed up.
For example, right here:
While we dramatically improved our $7.99 unlimited streaming service by embracing new platforms, simplifying our user-interface, and more than doubling domestic spending on streaming content over 2010, we greatly upset many domestic Netflix members with our significant DVD-related pricing changes, and to a lesser degree, with the proposed-and-now-cancelled rebranding of our DVD service. In doing so, we've hurt our hard-earned reputation and stalled our domestic growth.
We think that $7.99 for unlimited streaming and $7.99 for unlimited DVD are both very aggressive low prices, relative to competition and to the value of the services, and they are the right place for Netflix to be in the long term. What we misjudged was how quickly to move there. We compounded the problem with our lack of explanation about the rising cost of the expansion of streaming content and steady DVD costs, so that absent that explanation, many perceived us as greedy. Finally, we announced and then retracted a separate brand for DVD. While this branding incident further dented our reputation, and caused a temporary cancellation surge, compared to our price change its impact was relatively minor. Our primary issue is many of our long-term members felt shocked by the pricing changes, and more of them have expressed that by canceling Netflix than we expected.
And again here, showing some sense of humor with the use of the word "relief":
Investors and members will be relieved to know we are done with pricing changes, and that at $7.99 each for streaming and DVD we can move forward for a long time.
The first time Hastings apologized, he did so while simultaneously introducing the much-mocked Qwikster. The second time he apologized, it was to simultaneously announce that Qwikster was a no-go. Now Reed Hastings is done apologizing: His prices are set, and he has his strategy going forward. He has faced the press, keeping his cool during a "gotcha" interview with the New York Times, and he has faced his disgruntled members, answering questions in the comments section after announcing Qwikster.
Perhaps he has learned something from his four months of being Bill Buckner. Perhaps he has learned the value of being forthright with his customers, the necessity of honestly explaining unpopular decisions to the public rather than assuming we will understand, and the value in balancing the wants of his subscribers with the needs of his business going forward.
Perhaps, too, he has learned the need to secure Twitter handles before announcing a company.
In any case, Hastings seems to finally get it. With his company wavering, he cannot afford to let the ball through his legs one more time.