Saturday, September 24, 2011

Has NetFlix Lost Its Mind?!

When they say "this storm may pass"--like comparable consumer uprisings against Apple and JetBlue--they are missing a key point. NetFlix has already announced significant revenue impact, due to cancellations from the new pricing. So it is already more than a "passing storm". Now, they are making things even worse. So if (when?) they get more cancellations from the Qwikster side (nothing about this should make a pure NetFlix streaming user care), the impact is that much greater.

This point is also interesting to me:

“People love Netflix,” said James L. McQuivey, an analyst at Forrester Research. “What other media distributor adds two-plus million subscribers each quarter? Only Netflix and only because people are thrilled with it. But once you arouse such passions in people, you have to expect that they’ll be equally passionate when they feel betrayed. And that’s what has happened.”
I do feel somewhat sympathetic to Netflix. I was drawn to them for foremost for their rock-bottom prices. Usually, the innovation in consumer content is like McDonalds--providing much more food, for a little more cost. Too rarely is it focused primarily on driving down current cost (the ARPU mentality at work).

So I feel sympathetic to NetFlix, because I know they have had a hard time attracting more content, and renewing what they have at the current low prices, and I think their prices are still very low. Nevertheless, I like the implied message from consumers--a big, fat middle-finger to higher prices.

And the latest Reed Hastings move with splitting of Qwikster is just dumb. 1+1=3 and 2-1=1.5 is the logic of the M&A Wall Street crowd--not the consumer-focused company.

(See Cringely for a less fault-finding of Netflix different take.)

5 comments:

  1. I wish someone could explain to me what's the big deal about Netflix increasing their prices? Don't subscription services do this all the time? I get that no one wants to pay more than they used to, but to the point of canceling? I really don't get it. I'm serious!

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  2. I think it is 3 things. One, the magnitude of the price change. 60% is a pretty stiff increase. I would be pretty unhappy if my broadband bill went from $40 to $64 overnight.

    Second factor is that Netflix core customer, I think, is a price sensitive value-seeker. $9.99 for all the streaming movies you want, plus a DVD by mail was very attractive. That's how I got on board.

    Three, their core demographic is also internet-savvy and vocal. So I think the three came together for a "perfect squall" of consumer indignation.

    Like I say, I am somewhat sympathetic to Netflix. It's still a pretty good value. But the agitator part of me wants to see more justified consumer indignation. I want consumers to be like Wal-Mart's supplier negotiators on price increases, or Tea Partiers on tax increases--the answer is "No, Never, It's a Non-Starter"!

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  3. What is the overlap with the group of consumers who stand in line for hours every time Apple comes out with an overpriced new product release? :)
    Consumers are extremely selective in what they get indignant about. Or maybe selective is the wrong word. Inconsistent.

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  4. P.S. I still only pay Netflix %4.99/month and have zero interest in streaming, so maybe I'm the shortsighted one here. Also, the CEO's letter was kooky.

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  5. Nah, if you plan a little, DVDs work fine. Kids/teens and planning don't go together, though, so streaming is ideal.

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