Qwikster nixed, Netflix catches some flak
Wall Street embraces Netflix's decision to cancel the spinoff of its DVD-by-mail service, but some subscribers find the company's moves just too erratic. Netflix's history shows company is unafraid to change its mind.
Even after the Web's top video-rental service announced today that it decided to cancel plans to spin off the DVD-by-mail operations into a separate service called Qwikster, there's still a lot of criticism of the company.
Most of the reaction to Netflix's announcement appears to be positive, but only three weeks ago, the Qwikster idea was widely panned. Why do people have a problem now?
"Netflix can't make up their mind," writes Twitter user Lisa Maly.
Perhaps Twitter user Brandon Sullivan sized up the negative reaction best with this post: "People sigh in relief, then scratch their heads over management at Netflix."
Moves by Netflix have been too erratic lately for some. Management has seemed unsure of its direction since July. Confidence has been eroded, certainly with investors. In July, Netflix shares topped $300 but since then the stock has plunged to below $110. Wall Street, however, seemed to like what it heard today from CEO Reed Hastings.
The stock was up 7 percent to $125.75 in morning trading.
But what fans should know is that Netflix does have a history of making course corrections.
On June 19, 2008, Netflix announced it would stop enabling users to create separate user profiles on the same account. Yes, this represented a lot of college students and people who shared dwellings but Steve Swasey, a Netflix spokesman, said last night that the reaction from fans was swift and loud and Netflix reversed the decision less than two weeks later.
Believe it or not, Netflix also changed its mind about late fees. While Hastings likes to say that Netflix was founded after he got mad about the late fees he had to pay Blockbuster once, Netflix actually started out charging late fees. It was only after the company's first attempt at renting movies on an per title basis failed and it switched to a subscription service that managers stopped charging for late movie returns.
According to former Apple evangelist Guy Kawasaki, companies change their minds, or at least the smart ones do. In an essay about what he learned from Apple cofounder Steve Jobs, Kawasaki wrote "changing your mind is a sign of intelligence." He noted that Jobs, who died last week at the age of 56, was against the idea of enabling apps on his iPhone created by third parties because he feared that they could harm his handset.
It was only later that Jobs realized the apps would open up a whole new lucrative market for his company that he switched directions, Kawasaki wrote.
Howard Belk, co-CEO and chief creative officer at Siegel + Gale, which advises companies on their brand strategies and customer experience, was critical of the way Hastings delivered his message about the price increases back in July.
But he said killing Qwikster was smart because it would have complicated movie renting. He said that what Netflix needs to do now is go back to what it made it successful when communicating with users.
"They need to completely restore ease of use," Belk said. "That is how Netflix built its reputation, brand and following. Everything needs to be easy for customers right now."
To help win back customer confidence, Belk recommends that Netflix should offer some discounts or some kind of special considerations to subscribers.
"They need to say thank you to the people who have stuck with them," Belk said. "They need to express some gratitude."