Netflix One Year Later. The Road to Recovery.

It’s been one year and a nightmare for Netflix. In perspective, however, it seems the company would be unquestionably better off had they not made the initial proposal…the price increase that destroyed much of the company’s credibility, which sent stock plummeting into a downward spiral that they have yet to completely get over. An alteration to an existing—and quite successful—business plan was met with a massive customer exodus with cancellations all abound: a storm of lost subscribers that cost the company $11 billion.

photo credit: Lauren Marcus (http://laureljmarcus.com/2011/10/netflix-envelopes-a-gallery-of-art/)

To make a long story short, Netflix built itself as an incredible service and streaming source in ways that YouTube and Hulu at the time could only imagine. Netflix integrated its technology through stand-alone players like Roku as well as video entertainment systems such as the Xbox 360, Wii, and Playstation 3. Even from the simplicity of your own computer/HDTV screen, Netflix was a $9 monthly bill that all but seemed to pay for itself. And then Reed Hastings dropped the bombshell, which at the time he believed was a means of company expansion; new licensing deals and features, etc. Netflix customers saw it for what it was: Netflix doubling the price of its monthly service.

Hastings announced the separation of stream and mail service, opting to re-brand the service as an entirely new and mutually-exclusive entity known as “Qwikster.” In the eyes of customers, this meant that they’d be paying twice as much for a service that was cut in half, and they surely let Netflix have it. Within the quarter of the price hike, Netflix lost 800,000 subscribers in the United States. The move proved to be absolutely disastrous for both commerce and customer relations alike. This forced Reed Hastings to publicly apologize, scrap Qwikster, return prices back to their original states, and eventually resign.

Today, Netflix seems to have their sails set in the right direction. They are consistently adding more on-demand content on a daily basis—with a little original programming to boot—and a streaming service still at the same price. In fact, as of March 31^st of this year, customers have grown to 26.1 million, which is 1.5 million more since the debacle. However, stock continues to suffer, having lost 77% of its stock price over a span of four months. But with patience, good content, and hopefully by rebuilding the customer relations, they could fully recover.

In hindsight, Reed Hastings believes there was a failure to properly communicate his concerns and ambitions with what he wanted the service to do—especially in justifying the price hike. However, in all honesty it seemed everyone liked Netflix the way it was, and the numbers continue to show this. In fact, even E! online rated Netflix’s instant streaming service as 22^nd on the 100 best things of today’s pop culture list. 

Trying to fix something that “ain’t broke” or trying to expand upon a service that ranks high in customer satisfaction already is risking delicate balance. Before trying anything remotely as risky, it’s important to understand the hard lessons the once-successful Reed Hastings had to learn. Listen to your constituents first, that’s why businesses conduct social media ventures, open vanity 800 toll-free numbers, and construct focus groups. Make sure your company always wants what the customers want first.