Posted on Thursday, September 22nd, 2011 by Angie Han
Over the past few months, the seemingly untouchable Netflix has been dragged down by a couple of big fat blunders. First, the pricing model change lost the company a projected one million customers and sent stock prices dropping; then, in an effort to (somehow?) smooth over the situation, Netflix hastily introduced Qwikster and instead managed to only further irritate consumers and shareholders alike. It’s clear that Netflix needs to do something to turn their fortunes around at this point, or risk becoming the next AOL or MySpace.
But what, exactly? Netflix CFO David Wells recently offered some insight into the various possibilities the company is currently exploring in reaction to the backlash. More details after the jump.
During the Goldman Sachs Communacopia conference this week, Wells stated that while he hadn’t completely dismissed the idea of price cuts, he did not believe such a move would fix the company’s problems. “At this point, we’re going to step back and look at a number of things,” he said. “But lowering prices, or offering a discount for three or six months, is a little bit of kicking the can down the road. It’s certainly in the realm of possibility, but I don’t think its going to win back the customers that we lost.”
Another potential move would be to introduce an a la carte plan to complement the current subscription model. However, according to Wells, a la carte VOD isn’t high on the list of Netflix priorities. “What we said traditionally about VOD was it was a low-margin business that complicates (our) simplicity,” he explained. Nevertheless, “[i]n today’s evolving and changing world, we’ll look at a number of different options.”
Wells also said that Netflix is reconsidering one aspect of the Qwikster/Netflix split that had consumers especially peeved: the decision to totally separate queues for the two services. Members planning to subscribe to both services complained that managing two queues would be an added hassle, as they would have to rebuild their lists and re-enter their movie ratings for the recommendation system.
Although Netflix’s current woes stemmed largely from a failure to predict consumer reactions, Wells stressed that he didn’t want to go too far in the opposite direction and take too much stock in angry comments on blogs and on social media. Wells (rightly) pointed out that upset customers could just be more inclined to speak up, meaning that their views may not necessarily be representative of most customers’.
At this point, I’m not sure what Netflix could do to restore its public image. A price cut, while tempting, actually doesn’t seem like the wisest course if it means Netflix will only have to raise fees again in another several months. The a la carte component sounds intriguing, but Wells doesn’t sound terribly interested in developing it. Integrating the Netflix and Qwikster queues seems like an obvious win, but probably won’t go that far in smoothing things over. It’s also conceivable, of course, that Netflix won’t end up doing anything at all — that it’ll weigh their options and decide that staying the course is the way to go. So…
Discuss: What do you think Netflix should do? (Short of building a time machine to take them back to this past spring to talk some sense into their past selves, I mean.) Or do you think they’ll just stick with the original plan?