This post is part of the People’s Insights monthly briefs issue of January 2014.
Netflix is a provider of on-demand video streaming of movies, documentaries and television shows in the Americas and Europe, and DVD rentals in the US. Established in 1997, Netflix overcame a major reputational crisis in 2011 to retain its position as a market leader, with 40 million subscribers, in 2013. Business model, innovation and risks paved the path to both its crisis and recovery.
Pricing & Qwikster Debacle of 2011
A business built partially on providing real-time gratification, Netflix should have anticipated real-time customer feedback – and backlash – when it announced its new pricing strategy in September 2011. Netflix was separating its monthly unlimited video streaming + DVD rental package (priced $9.99) into two separate packages ($7.99 each, $15.98 for both). Customers were not impressed by what was essentially a $6 price hike out-of-the-blue and criticized the move – the package only made sense as a whole since the two collections complimented each other, they argued.
Two months later, Netflix CEO Reed Hastings announced the reason behind the pricing change – the company was separating the two services into separate companies to develop both formats deeper. The streaming service would continue as Netflix and the DVD rentals would continue as Qwikster… and the online websites for both not be integrated: reviews posted on one site would not be reflected on the other, and customers would receive two entries on their credit card statements. The apology post did more harm than good as customers reiterated their earlier stance, complained about the lack of convenience and simplicity and hated on the name Qwikster.
Three weeks later, Netflix scrapped the Qwikster plan. But it was too little too late – 800,000 subscribers cancelled their accounts in Q3, 2011 and moved to other providers.
Bounce back of 2013
‘Will Netflix ever Recover?’ media watchers asked across news sites and blogs throughout 2011 and 2012. Surprisingly, it was a different move of 2011 that helped the company bounce back – its plans to acquire original content.
Netflix’s first original program House of Cards debuted in February 2013, immediately followed by Orange is the New Black and a fourth season of the formerly cancelled Arrested Development. In addition to attracting Arrested Development’s cult following, Netflix also received 14 Emmy nominations and 3 wins, 6 Golden Globe nominations and 1 win, and1 Academy Award nomination for its original shows.
All this combined with its aggressive content expansion has ensured plenty of buzz for Netflix in 2013 – most of it positive for a change. Netflix still has a tough journey ahead with stiff competition from Apple’s iTunes and Amazon Prime Instant Video and unforeseen regulatory changes with the scrapping of net neutrality. Nevertheless it’s a remarkable example of how quickly a brand reputation can tank and how quickly it can come back – albeit with bold steps and constant innovation.
About People’s Insights
100+ thinkers and planners within MSLGROUP share and discuss inspiring projects – that are driving engagement with stakeholders – on the MSLGROUP Insights Network. Every month, we pick the best projects and analyse conversations around them, on the MSLGROUP Insights Network itself and also on the broader social web, into an insights report. Every quarter, we compile original insights from the MSLGROUP global network into the People’s Insights Quarterly Magazine.
In our first year and half, we focused on inspiring consumer projects around social data, crowdsourcing, storytelling and citizenship. We synthesized the insights to provide foresights for business leaders and change-makers in the ten-part People’s Insights annual report titled Now & Next: Ten Frontiers for the Future of Engagement, also available as a Kindle eBook and an iPad app.
In 2013, we launched “The Future of” series with a focus on Citizenship, Money and Employee (Re)Engagement. In 2014, we continue to track inspiring projects that are shaping the future of engagement, with a focus on reputation, employee engagement and citizenship.