Arrogance turns Netflix customers off

By Jerome Stuart Nichols | Life Editor
Added September 21, 2011 at 10:59 pm

Are you feeling the pinch of Netflix’s recent price hikes? Netflix feels your pain. Well, they feel its own pain as customers are dumping the service by the millions.

In August, Netflix announced changes to its pricing model that would split its low-end, and most popular, DVD rental/online video streaming subscription plan into separate plans. It also raised the cost of each plan by 60 percent.

When the change was originally announced, there was quite an uproar. Many people threatened to cancel their accounts and boycott Netflix. But Netflix didn’t seem to be worried about any great exodus of customers.

Maybe it should have been. Within seven days of the price changes going into effect, more than 1 million people canceled their Netflix accounts. This is only a small percentage of their 25 million users, but it seems Netflix is starting to get the idea.

Late Sunday night, co-founder and CEO of Netflix Reed Hastings published a blog post entitled, “An explanation and some reflections.”

In this blog post, Hastings breaks his silence and directly addresses Netflix users and shareholders.

“I messed up,” Hastings writes, acknowledging his responsibility. “I owe everyone an explanation.”

Later in the post, Hastings explains the how this situation spiraled out of control:

“In hindsight, I slid into arrogance based upon past success. We have done very well for a long time by steadily improving our service, without doing much CEO communication.

“But now I see that given the huge changes we have been recently making, I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both. It wouldn’t have changed the price increase, but it would have been the right thing to do.”

The response to Hastings’ mea culpa appears to be generally negative. The fact that after his apology and explanation he decided to lay out more changes to Netflix’s service, including a spin-off of their DVD rental service into a separate company named Quickster, probably didn’t help.

“Separating Netflix into Netflix and Quickster (worst name possible) is truly a snub in the face of subscribers,” former Netflix subscriber H. Lamar Thomas said in a comment on the blog post.

Grant Gouldon, another former Netflix subscriber, echoes the sentiment.

“Thanks for the explanation and apology,” Gouldon writes. “That helps, but your arrogance is still so thick it’s palpable. The ‘I’m sorry if you were offended’ is no apology at all. It just makes things worse.”

He continues, “I have been a Netflix customer and fan for many years. Have been a Netflix evangelist, turning on many friends to your service. I am still a customer but no longer a fan — I feel betrayed.”

Wall Street is not responding well to this news and consumer reaction; Netflix’s stock dropped 31.2 percent since the large subscriber loss was announced Thursday. Monday alone, Netflix’s stock lost 11.44 percent to close at $145 per share.

Hastings ended his blog post by saying, “Both the Quikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder
than words. But words help people to understand actions.”

It has yet to be seen how difficult that will be. But Netflix definitely has a lot of work ahead of it if it really wants to get its mojo back.