Netflix's Problem

 

A lot of people are getting mad at Netflix. First they raise their prices, then they go and announce plans to split into two companies. Oh the Humanity! How could they treat us so? The comments against Netflix are staggering. In my opinion, too many people are focused on the price aspect (they doubled the price and now I have to go to TWO websites?). The point is, they're not trying to be greedy, Netflix is looking too far into the future. Yes, I said that Netflix is looking too far into the future.

Netflix is made up of tech geeks and early adopters who, I'm sure, are all streaming television. They may have even done what my household has recently done, cut all pay TV sources and go streaming only. When I tell most people that we have no cable and no satellite and we get all content via streaming or an OTA (over-the-air) antenna they don't get it. I'm asked questions like, "so can you get TBS with that antenna," or "how do you get ESPN?" I don't. I get network TV for free (yes they still broadcast it) and stream everything else. I can only assume that many of those making decisions at Netflix have done the same thing. They are likely streaming using Netflix to provide the majority of their entertainment content. If they're like my family, they're also relying less and less on the DVD service.

So what does this have to do with the split and all the changes? I think Netflix is imagining a world in the near future where everyone gets more content like this and sees no reason to ever get another DVD in the mail again. Face it, eventually, all of the content on DVDs is going to be sold digitally like music. Netflix is anticipating that by splitting into two companies. With streaming enabled TVs and DVD players becoming the norm, streaming is set to take off. With postal rates about to increase and Saturday delivery about to go away, service via mail is going to get more complicated. Additionally, new competition from kiosks like Red Box may make take over what is left of an increasingly less lucrative physical DVD business.

A lot of people are upset because they don't want to wait for content to get to streaming/streaming has a poor selection of movies/streaming quality stinks/etc. Again, Netflix is making a play based on the future. As more and more consumers stream, the companies that own the rights to this content are going to see the need to stream more content more quickly. Who cares about DVDs being the first thing out if nobody watches them anymore? All of these problems will eventually go away and fix themselves. Broadband will get better, the selection will get better, etc. The only danger here is if broadband companies start to throttle bandwidth or find a way around net neutrality. 

The thing most people don't realize is that Netflix is thinking like a successful technology company NOT a consumer services company. By looking to the future, they're anticipating how people will act tomorrow. Maybe their methods weren't the smoothest, but they're trying to distance themselves from DVDs in the mail and make a play for streaming entertainment directly to the consumer. By doing so, they're betting on the long-term viability of the company and trying to anticipate how the market will change instead of reacting too late (like Blockbuster).

Consumer Democracy

I know I've been rather serious in my posts here lately, but I guess I've had a number of thoughts gel together. Today, I want to write a little more about the democratization of consumerism. It's in a sense a new idea and a backlash to the corporate greed of the last 20 or so years. Let's start with the new idea...

I saw a research study trumpeting the fact that consumers value "co-creation" in terms of building products. Something like 90% of consumers want a say in the matter. How is this at all insightful? I could have told you that without surveying 1,000 consumers online. People can customize their news (think Google Reader), their music experience, their entertainment, and their food easily. With a little effort they can go online and find a service to customize just about everything else. Why would it come as a surprise that they'd like some say in the design of products that will be sold off the shelf? 

For too long corporations have felt a sense of entitlement. Essentially they felt that revenues would grow every single year. No matter what they produce or put out into the marketplace, consumers will buy it. If not, they start firing employees, closing plants, eroding quality to keep the market happy. Business has become less about pleasing your customers and more about pleasing the shareholders. 

Businesses have forgotten that they essentially serve at the pleasure of the consumer.

If your pool of customers doesn't like what you're selling they can vote with their dollars elsewhere. Of course they want a say. They want the opportunity to buy things they like, they need. Items that offer quality and value. Low prices isn't what is always required. Lower prices everyday don't help when quality erodes to make those prices possible. A better model would be fair prices everyday, plus some love (quality + service = love).

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That brings me to the second point I'd like to make:

You don't own your brand, the public does.

Businesses need to stop trying to control their brands. The best way to control your brand image is not through control. It's by offering consumer the love I talked about earlier. If they get love, they'll give it.  They'll want to talk about your brand. They'll want to write about it. They'll be the best creative department and advocate you could imagine. If, on the other hand, you do something stupid like cut corners and blow up an oil rig, all the full page articles in the New York Times won't help. You need to get your ass out there and fix the problem. 

It's generally ok to make mistakes, but you need to acknowledge the mistake and fix it. Make it right (especially when it's not as daunting as a major disaster). When you screw up, it's time to spread more love, not less. And remember, if consumers mock you on twitter or via the web, don't shut them down with your lawyers. Take the time to figure out what the problem is and fix it. Nothing silences a smart ass quicker than nothing to mock. 

It's all common sense, but so many businesses get it wrong everyday.