Really, Netflix… really?

Sometimes making a decision and apologizing for it later can really backfire on you. Sometimes, it really IS better to ask permission first.

This concept really hit home for me when Netflix came out with its surprise announcement that it would be separating its streaming and DVD rental services, and thereby abandoning the $9.99 monthly fee in favor of two $7.99 fees. 

So, in my usual manner of veiled condescension, I ask this question: Really, Netflix… really?

Not that the rate hike in and of itself is a bad thing, because after all, businesses are in business to earn money. Rather, my bone of contention comes from the way the company announced it to its customers – with no real warning or alternative choice offered. I suppose that as the premier online DVD/Blu-ray/streaming company servicing over 26 million people, Netflix figured that it had built up enough brand loyalty that a mere 60 percent rate hike would not be an issue.

I reiterate… REALLY, Netflix?

As a consumer, I am surprised at what I would deem arrogance on behalf of Netflix, as the company discussed its expectations during its quarterly earnings call after the new service structure goes into effect. Basically, it believes that of the over 26 million currently paying subscribers, 3 million will opt for its DVD-only service, 10 million will choose the streaming only service and the remaining 12 million will continue to subscribe to both. This seems a bit over-confident to me, because it failed to really take into account how many of its existing customers would cancel their subscriptions altogether.

Pfffffft… you really think you can get away with only losing a million Netflix?

I CAN say (again, as a current subscriber) that the actual number for those who subscribe to both will actually be 11,999,999 from my vantage point, because a 60 percent rate hike makes a now seldom used serviced that much more unappealing as I calculate my monthly expenses.

Switching hats to PR guy, I have to broaden my perspective and appreciate the position that Netflix execs were in when they decided to raise the fees. I would almost call it okay to raise said fees because that extra cost is then passed on to the customer in the form of a bigger streamable catalog and an overall enhanced set of titles. It is my firm belief, though, that now, because of the way this was handled, instead of dealing with disgruntled customers who might not like paying a little more (but could have been more forgiving if the presentation was different), Netflix is now faced with the very real possibility of losing a significant number of its customers to competing services.

This is the point where the situation moves into the realm of crisis communications for Netflix. 

So how might they have handled this differently? 

Well, to start, I think that it might have been helpful to conduct a customer satisfaction survey, and broach the topic of a rate hike and subscription change that way. It would have given the company a better platform to provide justification of why they needed to do this. Regardless of the ultimate decision, at least customers would have felt as if they had a say in the decision. 

More importantly, they would not have been surprised by it.

As it stands now, it is anybody’s guess as to how this is going to turn out for the movie rental pioneer. If the almost immediate 10 percent-plus drop in stock price is any indicator, it is going to be a tough climb back to the top of the mountain.

I guess I can look at this as a good motivator to go outside and play instead of staying at home, watching TV.

Scott Smith can be reached at ssmith@sterlingpr.com. Follow him on Twitter @RealAskScott.

Comments

[Lisa Hawes]

You should check out the Funny or Die video on the Netflix Relief Fund - "the worst thing ever to happen to white people"
http://allthingsd.com/20110728/dont-look-away-from-the-devastation-of-the-netflix-price-hike-video/?mod=tweet

[Lisa Hawes]

Netflix cuts US subscriber forecast on fallout from split of DVD, streaming plans;shares sink
http://finance.yahoo.com/news/Netflix-lowers-subscriber-apf-1466852939.html?x=0