September 26, 2011
-- by Dave Johnson
Netflix was like the TV shows we watch -- every time we find one we actually like they cancel it. Even if lots of people are watching it is the wrong demographic - people like me don't buy enough stupid stuff.
We liked Netflix the way it was. Then they raised the price 60%, and the insult was pretty bad. That kind of begs you to tell them to fuck off, doesn't it? But it was still a pretty good service, even if it was no longer a good deal. So we were thinking ... maybe ...
So just to make sure, just to drive the nail in the coffin, they announced they are going to kill it for sure -- split it into two companies so you can't use their one website, can't decide whether to get it in the mail or watch it online (they let you know when you were ordering a DVD that is also online...)
It is hard to comprehend just how stupid this all is as a business plan.
1) Completely alienate your customers and
2) change your business model to get rid of the formula that made you successful and
3) provide such an amazing opening to all of your competitors.
So just in speculation, having been on the inside of some of these terrible strategic decisions and seen what leads to them, let me guess. And admittedly knowing nothing whatsoever about the people and the thinking involved.
1) There is a complete and utter separation of the Board and top executives from the cares and concerns of the customers. This is not just in pay scale (which I am certain is HUGE) but in how they live their lives, come home from work and take care of kids (they will have nannies, no question), and watch TV, etc. Especially that. I bet they do not watch TV or use Netflix much at all. I bet some of the people involved in this get up to play basketball at 5am. (That's a Silicon Valley thing.)
2) These would be people who live in a "strategy" cloud that involves making what they think will be BIG deals with the currently perceived BIG players. This is the world where Google buys a strategic player with no revenue for a few hundred million dollars because in 5 years that might be a key component in someones strategery...
3) This is about deals with power players who will force people and companies to conform to their business model rather than giving customers what they want. Like cable companies that make you buy certain bundles of channels instead of letting you choose channels to get, or telecoms that can dictate plans for minutes, texts, data... Maybe it has to do with using the data Netflix has on its customers -- Facebook's perceived advantage...
4) It will have something to do with financialization -- making money by doing almost nothing and requiring very few employees or facilities. Not like this terrible problem they have where they have to actually have storage and shipping facilities to ship DVDs and deal with packaging and the postal service and icky things that involve actual goods and making customers happy. Best to just find a way to hook into people's credit card accounts and get a monthly fee, or get royalties, or a percentage of someone else's business...
Just thinking out loud... Someone at the top of Netflix has been spending way too much time with people who strategerize a lot, and thinks they're eventually going to make way more money through forcing people or companies to pay them because of some kind of partnership they are planning, and not by delivering something solid to real customers, so they give up the whole business they have today.
One more thing, I'll just bet the day-to-day employees at Netflix are just freaking.
Posted by Dave Johnson at September 26, 2011 2:50 PM
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