Thursday, October 20, 2011

Opposing Views: Netflix restructure - bold embrace of the future or customer debacle?

It can be very rewarding to look at a mistake from multiple viewpoints. How would an optimist view this situation? A pessimist? When is a mistake not really a mistake?

Netflix' recent moves to decouple their streaming and video-by-mail businesses & raise their prices yielded some very interesting interpretations. Here are a couple of noteworthy ones.

From Dan Frommer on

The future of Netflix’s business is streaming video — not mailing plastic discs to your home. So the businessmotivation behind Netflix’s move to split its DVD rental business off as Qwikster is clear. If it allows Netflix to focus on the future, this decision could pay off big, and people will someday laugh and joke about this weird transition.

From Jason Gilbert in the Huffington Post:

The embattled CEO of Netflix has done a good, smart, honorable and difficult thing by axing Qwikster. He has shown that he is not insensitive to the demands and grievances of his customers, and that he is not afraid to admit, in public, that he has made a mistake. There is also the possibility that the most exciting development from Qwikster--namely, that Netflix would be getting into the video game business--is still on: A Netflix representative told tech blog SplatF that the company is "still considering" renting out games. Good for them, and good for Hastings.

What is not good for them, or good for Hastings, is that the existence of Qwikster is not an awful collective nightmare that will vanish upon waking. The very real Qwikster debacle is still a reality, as is the bungled price hike and aftermath. The misstep suggests to the public that Hastings is out of touch with what his customers want, a perception that a CEO cannot afford to have. It was a smart decision to mercy-kill Qwikster as quietly as possible before launch--even if it did prevent the rubber-necking American public the catharsis of watching it fail--though Netflix is still a damaged, blemished company in the wake of Hastings' four months of mistakes. Hastings has righted his wrong, but he has not elevated the company back to that high point of consumer confidence where it once so comfortably lived.

As with any major strategic move, a final grade can't be assigned for years, and only with the benefit of hindsight will we either "laugh and joke" about the meaningless static around this move, or mourn what Netflix could have been if they hadn't screwed up so badly. So, check back here in 2015 and see who was right.

[Image from Francis Carnauba via Flickr Creative Commons]

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