The subscriber exodus from Netflix following their price hike has been eye opening. The company continues to take a beating on the stock market, and the announced intent to split the company into two separate entities (one focused on mailed disc-media rentals, the other on streaming content) has done little to thwart the rapid decline. If anything, the decision to name the new offshoot Qwikster (the butt of many jokes) combined with the unfortunate @qwikster account on Twitter has provided fodder for the comedic onslaught.
Somewhere along the way the company lost touch, and in turn it compromised the trust built up over the years between countless Netflix subscribers and a company who clearly seemed to “get it” from the onset — or so it seemed from the outside looking in. How did the company that foresaw the demise of disc media come up with the idea to split the company in two and apply a name seemingly rejected from every web 2.0 startup naming pool?
Anyone not paying close enough attention to the events as they’ve unfolded could easily blame the attrition on the price hike, after all this was the tipping point for a large group of people who’d grown accustomed to the virtues of Netflix’s service. Unfortunately the truth is that the poorly handled fee hike was just the result of the company’s detachment from reality, a side effect brought on by distancing themselves from the very things that built the company up as a disruptive service to a growing audience seeking new ways to access their content.
So where did it all go wrong?
CEO Reed Hastings had a vision when he founded the company in 1997, and it comprised of the very romantic tech dream of delivering the entire library of Hollywood content to living rooms in HD quality without the use of disc-media. That dream drove Hastings’ vision for the company, prompting him to publicly call out the shelf life of disc-based content consumption despite Netflix building their core business by disrupting the disc-based delivery and rental industry. It was this open public awareness of this industry-wide shelf life that painted the picture of Netflix being a company so forward-thinking, so innovative, and so aware of the needs of a growing audience of what would later be deemed “cord cutters” that it seemed destined for continued success.
Netflix was one of those companies that consistently found its way atop my list of “dream employers.” A few years ago I had the opportunity to interview with them for a product management position, and although I’m not going to answer “why” I will say this, the process was…enlightening. Looking back, this feels like a watershed moment, and the recent debacle has only helped fuel this realization — resurfacing specific changes to the product that should have stood out as a warning signs, but were instead somehow magically overlooked.
Let’s go back to the beginning
When Netflix launched, it couldn’t fully deliver on Hastings’ vision to deliver every movie in the Hollywood library. How could it? The company was restricted only to content released on DVD, so in some ways Netflix was at the mercy of the DVD release cycle resulting in a restricted catalog from the very beginning. However, this didn’t prove to be a huge problem for the company, as renters were already accustomed to a limited selection on DVD, and the team cleverly innovated around this hurdle by introducing the ability to save unavailable titles to a queue.
If a title isn’t available yet, no need to worry. I can let my buddy Netflix know that I’m interested in the film by saving it to my queue, and when the title is available I’ll be excited to hear the news. Netflix delights me. It excites me.
It solves the age old FOMO problem.
Say what you will about any other area of innovation, from recommendations to streaming, nothing beats a simple functional utility that happens to smartly deliver on emotional returns. It’s the gift that keeps on giving. When new movies were released in theaters, I’d simply Netflix them in anticipation of an upcoming rental. Over time the company introduced and killed a swath of features geared toward utility and community. A feed of content reviewed by your friends was a notable addition, but ultimately bit the dust due dismal adoption numbers. I know firsthand that their user base wasn’t taking to community features and this lead to its demise, but in my circle of friends this was a blow to trust as well.
While in pursuit of a grander vision, the company seemed to have stumbled upon a mix of features, from rating to queuing and reviewing, that really caused its audience to embed further in the service. Not only was the service cost-effective from a savings perspective, but it also delivered on time invested as well. Netflix became a service I trusted because I learned that by giving Netflix more information I could come to rely on it to tell me when a movie I wanted to see became available, my ratings resulted in the recommendation of a new undiscovered title, or my friend posted a review of a recently rented movie.
It was fun. It was helpful.
So flash forward to the state of things now. The rate hike has caused countless people to either reduce their subscriptions, or flounce altogether. I fall in the former camp, and this has had implications for me as well. For example, as a streaming user I can only search the streaming catalog from here on out. Gone are the days where I could find a title that is unavailable, request an alert if streaming is available, and trust that Netflix will solve my FOMO.
Additionally, gone are the better recommendations as the content offering cannot compare to a library of DVD and Blu-Ray content. Instead, Netflix has turned into a dottering old fool regurgitating the same tired recommendations over and over again.
Lastly, the fun is long gone. Even though only a few people engaged, it was fun to see what my friends were watching on the service. Sometimes it made me embarrassed based on my selections, and other times it gave a sense of comfort that I’m not the only person who curls up to a horror schlock-fest from time to time. Either way, this was eliciting an emotional response.
Long ago the company swapped its insight into the needs of a growing user audience for the lust after business objectives. Hastings has admitted that his own arrogance played into this, and that the manner in which this was handled was shortsighted, but this feels like it might be a little too late. And that saddens me. Can the company get back in touch? I don’t know.
The original Hastings vision is not flawed, and the decision to make the necessary business moves to position the company closer to achieving that vision makes total senses. The manner in which these decisions were handled was flawed, and it speaks volumes about the value of the user in the eyes of the company. The decision to move away from solving small problems for users only reinforces this perspective.
Sorry Netflix, the trust is gone.