Netflix announced its earnings after the market closed today and the results weren’t good. Another 800,000 customers fled the service. As of this writing Netflix is down a whopping 26.86% in after hours trading. That would mean the stock has fallen 71.5% since its high on July 8th, 2011.
But Netflix’s CEO claims to have learned a lesson…
Q: Why did you try to do Qwikster?
Reed: In hindsight, it is hard to justify. Having separate brands can in theory make sense. However after the price increase, Qwikster became the symbol of Netflix not listening.
That quote makes it seem like he got the message. But did he? Take a look at this…
Q: Why not reintroduce a combined streaming-DVD?
Reed: we think future is brightest for streaming. We don’t want to subsidize DVD. We think $7.99 is such a great price that mostly we should focus on filling out content.
The focus for us is in rebuilding our reputation
DVD business will become like AOL dial-up. a slow decline.
The problem here is he admits to not listening but then doubles down on the exact same strategy. So you have to wonder what he thinks people were trying to say. To get that answer look no further than the NY Times Magazine Interview of him…
Last month, when announcing Qwikster, you apologized for the way Netflix handled its price hikes, writing, “In hindsight I slid into arrogance based upon past success.” But wasn’t introducing Qwikster the way you did the most arrogant move of all?
No, I think it was just a mistake in underestimating the depth of emotional attachment to Netflix.
I’m curious if you could have done any kind of research — or even a select-market rollout — that could have anticipated this?
I don’t know of any Internet service that opens on a regional basis. Our focus-group work concentrated on trying to understand consumers’ perspectives on names other than Netflix.
Now maybe it’s just me but I don’t think people disliking the name Qwikster is really the problem. The problem was and still is the company’s attempts to push people into the streaming-only service before it’s ready.
Note: I’m a streaming only customer.
But I get away with that because I don’t watch that much media. I use Netflix for no more than 10 hours a month and I have the financial resources to just buy what I want off iTunes if Netflix doesn’t have it. But not everyone is that lucky. So the limited content on Netflix’s streaming service is a significant issue to some people. Especially when the amount of content they have is shrinking…
When your agreement to stream Starz content ends in March, you’ll lose your ability to show Disney movies like “Toy Story 3.” You’ve played down the effect this will have on the service, but can you name a movie that my kids will enjoy as much?
We can give you hundreds of titles that we’ve been adding over the last couple of months, both animated big movies and Japanese anime and lots of Nickelodeon content as examples. And of course, DreamWorks is coming online in 2013.
But can you name just one that will cushion the blow of losing Buzz Lightyear?
I watch mostly independent films. I’m not in that particular demo. I’ll send you a list.
On top of all this you have the original content issue. Apparently Netflix doesn’t have the money to keep the Starz contract AND they’re so poor they need to significantly raise the price of their DVD service. But they can afford to pay for exclusive rights to obscure original content.
I admit to being on the outside here. As I said I’m a streaming only customer who doesn’t watch anything that’s part of the Starz contract. So my costs haven’t gone up and I’m not losing anything. But I can see how other customers would be fleeing in droves. To my mind Reed Hastings has built up a lot of good will over the years and I still think people should support him through this obviously tough time. But with him giving interviews like the ones above and the stock in a freefall he’s making that very hard to do.