Netflix’s surprising plan to split its DVD-by-mail and streaming video services into two businesses has many of its customers throwing tomatoes at the screen. Some 25,000 comments have been made on Netflix’s corporate blog about CEO Reed Hastings’ initial announcement, and another nearly 10,000 have been made on the company’s Facebook page. For the most part, the tone of the complaints has been ferocious.
Customers are upset for two reasons. In case you missed the news, Netflix began charging its DVD-by-mail customers a separate fee for streaming videos in July, amounting to a price increase for those who used both services. Customers were upset then, but the new plan frustrated them even more. By splitting the businesses, Netflix is creating two web sites for the two services, which means customers will have to manage their accounts in two places.
In addition, many customers were infuriated by the way the news was delivered. An email that starts out “I messed up. I owe everyone an explanation” would understandably lead you to believe that Netflix would be reversing its prior decision. Instead, CEO Reed Hastings goes on to explain a business change that creates inconveniences for customers.
Customers weren’t the only ones upset by the announcement. Many Wall Street analysts and money managers gave it a thumbs-down, too. The stock dropped on the news. And while some observers see the logic in the move, many also acknowledge the company’s miscues and the lack of much upside for customers.
So what should Hastings do now? The company isn’t going to shift gears and change direction—it believes the two businesses will each get more attention and be run better in the end. In the meantime, Hastings has an army of angry customers on his hands who could very well decide to move on. What are some short-term moves he could make to dissipate the anger?
First off, he could do something for loyal subscribers. The people complaining on Netflix’s blog and Facebook page are there for a reason. They loved the service and don’t want it to change. But they’re unlikely to stick around long if they don’t feel like they’re appreciated. So why not do something for them? Give them a few free months of service. Offer them a better deal on pricing for a period of time. Grant them a way to manage their two accounts in one seamless place. Make changes without letting your most loyal customers know what’s in it for them, and they won’t be loyal for very long.
He should also get more involved in the conversation. Netflix VP of corporate communications Steve Swasey says Hastings has been responding to some comments on Facebook and the blog, and answering emails directly. Still, those comments aren’t very visible, and there doesn’t appear to be a team heavily engaged in using social media to help diffuse the collective howl. As of mid-day Wednesday, the company’s Twitter account had been mum since the initial announcement. There have been no new posts to its Facebook page or blog. In today’s world, such silence is as risky to your reputation as the outcry itself.
Hastings has a pretty good story to tellm and he ought to get out front and center with it. He’s an entrepreneur who started a company simply because he hated doing what we all hate—paying late fees. He runs a company that, for all its recent misfires, treats employees generously, runs mailing operations better than the post office and, at least at one time, bucked the trend to help get the customer experience right.
Having interviewed him in the past, I know Hastings doesn’t come off as a stiff suit. Getting him to explain his thinking in a televised interview—and offer a sincere apology for his most recent fumble—might help customers understand Netflix’s move a little more. Hastings is known for taking the long view, and he could use to be more emphatic about his worry that if Netflix doesn’t do this, the company could be in trouble in the future and that could mean even worse news for customers. Hastings seems to know this: He said in his blog post that “when Netflix is evolving rapidly, however, I need to be extra-communicative.” So do more of it. And quickly.
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