Yesterday customers received an email from Netflix, and in one fell swoop this much loved company, one that was a darling of its customers, had put that strong equity on the line. It is ironic that they were thanking customers for their business, in this email, even as they were clearly holding a gun to their heads with another price hike.
Netflix succeeded in pummeling Blockbuster by re-inventing the movie rental category with an innovative business model, high customer satisfaction and a low cost service that was based on giving customers flexibility and not forcing them to adhere to policies designed to make the company lots of money.
I understand that Netflix’s runaway success propelled then into a space filled with deep pocketed competitors in the form of cable providers, telecoms, Google, Apple, Amazon, movie studios, TV networks and a slew of other companies all vying for a piece of the pie. I also realize that the company desperately needs cash to pay for the rising cost of content, and has to lower its costs (example postage) to survive and compete.
Steve Swasey, VP Corporate Communications said today, to MSNBC:
“We anticipated some folks were not going be happy with the change. It didn’t surprise us. 30,000 or so is a sub set of 23 million subscribers. They’re not speaking for the majority. We would like those members to stay with Netflix, but the reality is people will leave. We’ll make it up over time and the service will continue to grow. I don’t want to sugarcoat this. We do expect a certain amount of people to leave the service. Besides, Netflix members already go to Redbox, order cable, go to theater and Amazon.”
Barely a few months ago Netflix changed its plans raising their prices and forcing everyone to add a streaming option. So it seemed like they were gently moving their customer base into a streaming only world; gently being the keyword because new releases are currently not available for streaming and will not be for the foreseeable future and the streaming quality is still mediocre, at best.
Netflix has a customer base that is has been the envy of every company; staunchly loyal and fiercely evangelist; and many would have followed the company to the ends of the rental earth. But large numbers are now seeing a very different kind of red. And somehow I don’t think Mr. Swasey’s words are going to placate them.
This customer outrage is picking up steam. It remains to be seen how many of their 23 million customers will cancel their subscription, rather than pay the 60% increase being demanded, and how many will stay to help Netflix truly stay out of the red…