Netflix CEO Reed Hastings has made a number of really good moves over the past ten years. From knocking out Blockbuster (and nearly every other brick and mortar video store) to becoming THE default source for movie rentals, Netflix parlayed it all into a high flying stock offering and has continued to be a consistent performer. In fact the business even remained solid through the recent (since 2008) seemingly endless economic downturns.
And even more suddenly it all is coming crashing down. The rise in pricing for Netflix subscribers was more than eyebrow-raising but even more so was the creation of something Mr. Hastings is calling ‘Qwikster’. The plan was to have ‘customers’ have both a Netflix account as well as a Qwikster account. I cannot think of a single person that would want to operate two accounts when they only had to have one account before.
The result was that more than one million Netflix account holders cancelled their accounts. That’s a stunning number. A company known for being customer-friendly and really understanding their customers apparently does not have a clue at all.
Supposedly Netflix had 25 million customers paying $ 10 per month before the move, so by losing 1 million customers it would follow that there are now 24 million customers paying $ 16/month. Doing the math would make you think Mr. Hastings remains a genius. In fact there are reports that Netflix had figured in a certain amount of customer attrition in raising their prices.
I am not sure how many people have signed up for Qwikster. I can assure you that I am not one of them. In fact we had cancelled our Netflix account before Netflix made the changes as we were not watching enough to make it worth the expense.
Netflix has made it better for…. Netflix. They did not solve a customer problem at all and may have created some in the process.
But I cannot keep from wondering – was Mr. Hastings really that stupid for making the move? They now have fewer but more profitable customers.
What do you think?