I THINK it is fair to surmise that many of you are either subscribers to or have heard of Netflix, the DVD-by-mail and video streaming movie service. I am a big fan of the service. Yet one now has to pay $7.99 a month for either the DVD mail-order service or the video-streaming service, even though both services together used to cost less than ten bucks!
I had once thought of Netflix as a company that was not trying to squeeze every last dime out of me. The type of deal that Netflix previously offered spoke especially to me as a college student. I did not want to pay some exorbitant fee for a movie service when I could access other methods of movie watching for much less.
That brings me to my next thought: quality movie service. Many of you are probably also familiar with the well-known movie provider Blockbuster. Apparently Blockbuster received a lot of flack for its unreasonable late fees so it came up with the clever ad slogan "No More Late Fees" back in 2005. The only catch? Although most stores participated in the new system, franchises had the option to either implement it or opt out of it. I quit Blockbuster when I realized it did not really care about its customers, tried to gouge their pockets and made renting a movie too inconvenient.
Why do I bring up Blockbuster? Netflix is starting to look a little like its corporate counterpart. Initially, it was a small upstart company cofounded in 1998 by CEO Reed Hastings. It had fewer than 9 million subscribers in 2008 when it introduced its video streaming directly to customers' televisions. In November 2010, it launched its streaming-only service and the company grew to an astounding 23 million users and was expected to reach 30 million by the end of this year. Media executives and investors alike expressed their astonishment, discontent and even anger about Netflix's success. Time Warner CEO Jeff Bewkes, for example, accused Netflix of trying to "take over the world."
It is remarkable that a company that redistributes the entertainment material of other companies through a low-fee subscription managed to wipe out the competition. Jonathon Knee, an investment banker and director of the media program at Columbia Business School, praised Netflix as a company that actually "takes pride in operating efficiency and its customer focus." Netflix built up a devoted and loyal following that certainly showed no sign of letting up.
Netflix allegedly prides itself on its relationship with its customers and pays attention to customer feedback. Yet in July, the company announced a price hike without first alerting its millions of subscribers. On Sept. 18, Hastings issued an apology on The Netflix Blog for not consulting or even warning customers of a potential price hike. To make matters worse, he announced a split between the company's Internet-streaming service and its DVD-by-mail service. Customers now are required to pay separately for each service instead of having the option of a combined service. Meanwhile, the DVD-by-mail service is not retaining the Netflix logo on its signature red envelops. It will feature the name "Quickster" instead.
One of Netflix's crowning achievements was that it was simple to use. Yet Hastings is sticking to his guns by claiming that "another advantage of separate websites is simplicity for our members." No, I am afraid many customers do not quite see it that way. Rather, Hastings' explanation amounts to politically sidestepping the fact that his company is engaging in a price hike while making its service more difficult to use. The company is now losing disgruntled customers right and left - an estimated one million customers have abandoned it since its first announcement in July. This has cost the company about $8 billion of its worth.
Besides letting down its customers, Netflix is setting itself up for failure. If streaming really is the future, it may not be wise for the company's leadership to separate its streaming service from its DVD service. Let's face it - the movies one can stream on Netflix are rather lacking in terms of diversity. The DVD service, on the other hand, more than compensates for what is lacking in the streaming service. There are a lot of other companies out there such as Apple, Hulu and our old friend Blockbuster waiting with bated breath for the moment Netflix no longer commands the streaming market.
Time and time again we see a classic story played out: A corporation gets too big for its britches, expands too quickly and soon forgets the customers that helped bring the company its original success. Then the neglected and loyal subscribers fall by the wayside. So do us all a favor, Reed. If you do not want to end up like all the rest of your insensitive, detached corporate counterparts, start listening to your customers. I have a feeling you will find quite a lot of wisdom there.
Devon Darrow is a Viewpoint writer for The Cavalier Daily.
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