How Netflix lost 800,000 members, and goodwill
2011-10-26 03:39:56 GMT
Reed Hastings is in a hot bath with a friend plunged last month, when he split a secret: his company, Netflix, was about a plan to share their movie rental service in two halves announce - an offer streaming movies over the Internet, the other with old DVD by mail.
"It's terrible," the friend who was also a Netflix subscriber, he said under the stars in the Bay Area, according to Mr. Hastings. "I do not want to deal with both accounts."
Mr. Hastings ignored the warning and said that leaders should generally expect that their friends say.
Since then he has not looked back. Subscribers and many were outraged at the service. The plan still clouded Internet service once widely respected, who had been hurt by higher prices, unpopular in the summer. Mr. Hastings was forced to reverse split planned - but not the price increase - three weeks later and apologized.
Monday, showed the company the damage had been done. He told investors that it ended in the third quarter of the year with 800,000 subscribers, at least in the U.S. compared to the previous quarter, the first decline in years. The stock plunged more than 25 percent in after-hours trading.
Despite the decline in subscribers, the company has also financially in the neighborhood. It posted a net profit of $ 62.5 million or $ 1.16 a share, compared with $ 38 million, or 70 cents per share a year earlier. Revenue rose 49 percent to $ 822 million. Both sales and earnings at the top of analysts' expectations.
Like many companies, built in Silicon Valley, Netflix is proud of its analysis, data-driven approach to decision making. But he stumbled business classic. In his use of data and long-term strategy, the company underestimated the emotions unquantifiable subscribers who still want those little red envelopes, even if they forget to watch the DVD never.
Mr. Hastings said in an interview last week, his more detailed discussion of the period of bruises, he was guilty of complacency and "too fast." But he said he still believed - like almost all investors and analysts - the future lies not in Netflix DVDs, but streaming over the internet: "We need to move more quickly streaming," he said. said.
Change twice in the interview, Mr. Hastings because of hostility prices and the Netflix debacle to hit the bad mood in the country, even quoting the Tea Party and Wall Street occupy the movement by name.
He said - and reiterated in a conference call for investors on Monday evening - that customers were more disturbed than in the summer of rising prices in the fracture surface. By September, costs of a combination of video and DVDs as low as $ 10 per month, now, in the same package costs $ 16. "We are pleased with changes in pricing are done," Netflix said Monday in a letter to shareholders.
Mr. Hastings said he was not sure that the plan was presented to split the company, customer focus groups in order before it is published. Mr. Hastings said he had accepted. But he said he does not remember what he said the target groups about the plan.
He said that Netflix now try to ensure the decision making process that it slow down to create more room for debate about important changes in the company.
How to Netflix came in contact with its customers is a cautionary tale for other companies trying to turn the former into new media. Widespread than the company's Internet streaming service to consumers, the number of participants and with them the company's shares up to nine since the beginning of 2009 to peak at over $ 300 in July.
Last year, Fortune magazine Mr. Hastings, 51, on the cover as a businessman of the year after he appeared to pull the rare feat of tweaking "innovative dilemma" by the Netflix for the digital future of DVD rental.
A key to success was the way he mixes the new shops and cultural heritage. While the document library for streaming is relatively sparse due to licensing restrictions Hollywood, Netflix customers could find many of these films disappeared, especially the new versions, along with much larger selection of DVDs.
But Netflix will have to spend more money to additional material for its streaming service license. Earn $ 10 per month, and participants was inadequate, that the inflated cost. Mr Hastings has defended the increase in the last week Monday, but he said it was "too large price changes at once." Hubris played an important role in the mistakes, he said.
For over a year, all signs indicate that Netflix customers willing to have quickly become a future in the film and television come to them immediately instead of over the Internet in the post. Mr. Hastings said the decision was based on Qwik form, how the company will be called DVD by mail, in part on data that showed a faster increase than expected by its customers streaming.
In the first quarter of this year for the first time, shipments of DVD have declined from year to year what to tell Netflix that activity culminated DVD. Choose "very few" new subscribers to receive DVDs by mail, said Mr. Hastings.
Stuart Skorman, an entrepreneur who previously led a Bay Area chain store movie rentals and the danger of a film over the Internet last year worked with the executives of Netflix, after licensing one of the company data base movie recommendations. He said he was beaten seemed at the time by the lack of Netflix over its DVD-rental care.
"I think they should have paid more attention because it was their customer base," he said. "That made it special."
Steve Swasey, Netflix spokesman disputed the idea that the company does not care about the business of DVDs, saying it was still hard for the purchase of service delivery, focusing on the films.
The announcement in September fracture seemed "very data-driven," said Rich Greenfield, an analyst for Media Research BTIG. "I think that the company believes, because many people are not just the DVD will accelerate the transition we are."
That the company did not seem to respect, was the premium that consumers place on the options - even if they do not really enjoy all these possibilities. Just ask all-you-can-eat buffet or operator of a gym owner, who sold 6 months after the accession.
Netflix red envelopes "were in fact occupying power slots between the couch cushions for a long time," said Greenfield. "But even if there is no use of DVD, there was a perception of value."
Mr. Hastings said he expected the company would DVDs by mail, he identified two long-term markets for their "last a long time." Customers in rural areas, or not to have n no access to broadband Internet streaming, and the film school "types", which gives a complete catalog of old films like.
The plan scrapped Qwik led to speculation among analysts and managers, as Mr. Skorman form, Mr. Hastings wants to sell to Netflix. While Netflix has beaten rivals in the business of DVD rentals as Blockbuster and Wal-Mart, he faces a growing phalanx of formidable players in the streaming movies, such as Apple, Amazon and Hulu.
Mr. Hastings has denied such plans. "Mercenary CEOs are always ready for a sale, and missionaries are still preparing the long term," he said. "I'm clearly in the latter camp."
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20-12-11 -:- 11:41:08 - LUZgYxNvnvF
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30-03-12 -:- 11:15:23 - Jen
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19-03-13 -:- 17:20:54 - rOeXLSjCRjxuYOnX
Absolutely first rate and copper-btootemd, gentlemen!
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