Wednesday, July 11, 2012

Netflix: The Misexperiment

Image representing Netflix as depicted in Crun...
Image via CrunchBase
Netflix's lost year: The inside story of the price-hike train wreck
Influential voices at the company departed just before Netflix embarked on a doomed attempt to spinoff DVD operations. Reed Hastings stopped listening, and that's when the trouble started...... The company lost 800,000 subscribers, its stock price dropped 77 percent in four months, and management's reputation was battered. Hastings went from Fortune magazine's Businessperson of the Year to the target of Saturday Night Live satire...... He became one of those executives with the "visionary" label, who can predict where a market is going before it happens, and was asked to join the board of directors of two of the most important companies in tech, Microsoft and Facebook....... Some employees were stunned by how quickly and unemotionally DVD operations, the backbone of the business for a decade, was split off from the company..... Netflix's data showed that interest in DVDs was declining. If given a choice, people preferred the instantaneous gratification from streaming video..... Move too fast, and you alienate customers. Move too slow, and you lose them to someone else. Damned if you do, and damned if you don't. .... "DVDs are a cash cow for Netflix," Pachter said. "Why would you kill off that business before it's harvested? Consumers weren't looking for Reed to get out of the DVD business. They were just looking for more streaming content." ..... The CEO got a new nickname: "Greed" Hastings..... a bewildering, still-unanswered question: How could a company that had built such customer loyalty be, at the same time, so tin-eared to what those customers wanted and so slow to respond when they made their wishes clear?

I supported the move last year. (Netflix Cut Off The Gangrene Limb) I guess it was not the best of moves for Netflix. Perhaps the timing was not right. Bill Gates dipped into the tablet form factor a decade ago. It was a little early.

Now you know why BlackBerry is not making fast and furious moves. (Kidding)
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