Wednesday, October 26, 2011

Netflix Broke This Cardinal Rule, Now Pays The Price

Image via CrunchBase

Some years ago, computer industry legend and camera phone inventor Philippe Kahn gave me an important and fairly obvious piece of advice:

“Don’t ever give your customers a reason to reconsider their purchase decision.”
When they are forced to reconsider, Kahn warned me, some customers will be lost. Cause enough customers to reconsider and you have… Netflix.

The movie rental and streaming giant yesterday announced even worse than expected results, prompted by customer angered by the most poorly handled pricing and business model change in as long as anyone seems to remember. (Leave a comment to nominate a second-place disaster, since only New Coke comes to my mind).

According to Bloomberg, Netflix…
Posted third-quarter customer losses that were worse than its September forecast and predicted more cancellations over a price hike. The shares plunged 27 percent.
Domestic subscribers fell to 23.8 million as of Sept. 30 from 24.6 million three months earlier, a bigger decline than the company projected, according to a website statement today. This quarter, U.S. customers will fall short of the 24.9 million analysts were predicting.
When Netflix caused customers to rethink their purchase decision, backed up with half-hearted apologies, the loss of content from Starz, and other miscues, customers revolted and appear to still be leaving. Good for them.

Will they stop?

Of course, but Netflix is now damaged goods and competitors on all sides have been given a huge opening. You don’t see anyone — yet — calling for Founder/CEO Reed Hastings’ head, but if there are any more big miscues, that’s the next step.           More