“When
Netflix is evolving rapidly...I need to be extra-communicative. This is
the key thing I got wrong.” ~ Reed Hastings, CEO of Netflix
It goes without saying that Netflix has had a rough few months; dealing its customers (..and subsequently itself) blow after blow. The quote above is part of the explanation CEO Reed Hastings recently posted on the Netflix blog, regarding all of the recent changes the company has made. Although, I’m skeptical that it will be enough to stop the bleeding. Why? Because in addition to using the blog to explain the changes that have already taken place, he also announced that Netflix is restructuring its business into what will essentially be two separate brands - Netflix DVD rental and its new media streaming subsidiary Qwikster. Yes, the days of paying one monthly subscription fee for both the DVD rental-by mail and media-streaming services are gone. Netflix customers will now have to pay two separate subscriptions; two separate costs.
As
of yesterday afternoon, Netflix stock was being traded at $129 a share.
A roughly 57% drop since July when the company’s stock was at its peak;
trading at over $300 a share. And while Netflix has certainly enjoyed
tremendous business success and has by far been the market share leader
within the video rental industry, its shareholders have lost a
significant amount of confidence in the company in recent months...and
Netflix competitors smell blood in the water. One company’s hard times
can be another company’s opportunity for significant growth. I’m sure Amazon or Hulu for example, would love to take those
awesome online movie rental sales numbers away from Netflix. And
Blockbuster? Well...who could blame them for wanting another chance
since its fall from movie rental glory, and subsequent bankruptcy filing a
year ago!
Most
of us are annoyed by change of any kind, let alone change that we don’t
agree with or perceive to be negative. And if there’s one thing that
really gets under our skin from a customer perspective, it’s being
blind-sided by changes to our products and services. I said all of this to say - Netflix has turned off a lot its customers.
The
initial wave of bad news came in mid-summer when customers
were suddenly hit with subscription service fee increases. There was no email about it, nothing. Then comes the
news about reformatting the DVD rental and video streaming services into
two separate subscriptions. I think this may have been the most
damaging blow. I say this not simply because the company decided to
reformat. There’s nothing wrong with decision-makers wanting to
ensure that the movement of their business is aligned with the movement
of technology. It’s also fair to say that when you’ve had as much
business success as Netflix has had (i.e. virtually wiping out
Blockbuster), it’s understandable to assume that there would be nothing
but clear blue skies ahead. Nevertheless, the way Netflix managed the
communication of all the changes from an external perspective, was
sub-par. When it came to communicating with one its most crucial
stakeholders; the customers, about what was going to be happening and
why - Netflix dropped the ball.
I
realize there’s no guarantee that informing a customer about a price
increase or change in their service(s) prior to a change being
implemented, will keep them from taking their business elsewhere. But, I
do think that proactively communicating with customers and making them
feel informed might at least prevent a significant loss of integrity to
the relationship you have with them.
As I discussed in my post titled “Don’t Be A Lazy Communicator”,
when we don’t proactively communicate and inform; and simply assume
that those on the receiving end of our messages and actions will simply
just understand or be accepting, we increase the potential for an
undesirable outcome. Not taking advantage of opportunities to
communicate openly with stakeholders, we risk weakening the relationship
we have with them.
As
I’ve adamantly expressed in previous posts, communication is
invaluable. Without it, understanding, which is critical within any
relationship context - is impossible. Increased communication in times
of change is critical, especially with stakeholders the change(s) will
directly impact. When we don’t use proactive communication we miss out
on opportunities to manage the process; we miss out on opportunities to
control perception; we miss out on opportunities to prevent a loss of
integrity to the relationship.
Neglecting
to communicate openly on the front end potentially puts you in the
awkward position of having to clear things up and give explanations on
the back end. The recent explanation
posted by Reed Hastings on the Netflix Blog is unfortunately, a great
example of what can happen when we take communication for granted or
don’t proactively communicate. To the CEO’s credit, at least he made an
effort to repair what seems to be a growing between Netflix and its
customers. Though the impact his words will have remains to be seen.
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