thinking stiff

Open Letter to Reed Hastings & Netflix

Posted in Uncategorized by thinkingstiff on 2011/09/19

Dear Mr. Hastings,

Every so often some genius with a crazy idea comes along and creates a product that is so brilliant it becomes an integral part of the fabric of society. These people usually have a bold and overreaching vision, an intense passion for what they do, a cocky belief that they can change things, and are willing to make the risky, bet-the-company moves that such a dream requires. Throw in a bit of serendipity and they change the world. You, sir, are one of those people, and Netflix is one of those products. You’re a hero.

When a product reaches the status of Netflix, it’s a household name. It becomes the generic term for its entire industry. Your product becomes more than just what you’re selling, your brand is your product. At that point, you practically have to kick your customers in the face to get them to stop giving you money.

Netflix is there. You’ve created a multibillion-dollar company that grows by huge amounts every quarter. You win. You did it. Congratulations! Netflix is invisible and indispensable. I’ve never been able to imagine not having it; it’s like my electric bill. For some time now I’ve viewed Netflix as this untouchable company that would continue to grow and innovate, and slowly take over the dated cable-television empire. No one has come close to being able to compete with you.

I have been a member of Netflix since the summer of of 1999, before subscriptions started, when you paid per movie (twelve years!). I found your service after the frustration of paying $56 in late fees at Blockbuster once for a single movie. I was so furious, that I still get riled up thinking about it. I signed up for your subscription plan in December of 1999 and the first movie I got was Intolerance (1916) (for a film history class). I kept it for a YEAR! At first it was just because it’s a difficult film to sit through. Slowly, the longer I kept it, it became a test of your “no late fees” mantra, almost like I was taking out my $56 late fee on that movie! I kept expecting to get an email from you guys asking where it was. Then finally, and triumphantly, it became an icon for the success of your business model. I was sold. I bragged about Netflix to everyone and would show them my copy of Intolerance (“No, seriously. No late fees, EVER!”).

I’m a very loyal customer and loyalty means a lot to me. In the last several years you’ve made changes that have made the service less useful to me, but the brand always won out. I just couldn’t ditch it. You slowly started dumping all social aspects of Netflix. I used to love logging in and rating all my movies so my friends could see what I was watching and what I like and vice versa. It made my movie watching experience much more enjoyable. While the whole world was becoming more social and connected online, Netflix was becoming an isolated website I rarely logged into. These changes have resulted in me using Netflix less and less. I slowly stopped rating films because there was no one to show them to. Before long I realized the same three DVDs have been on my shelf for six months. But I still kept the brand. I still kept paying.

The industry has changed a lot since you started Netflix. There are now many options for watching content online. I’ve been an Amazon Prime member for awhile now and out of nowhere they started offering free movies. And iTunes’ selection and interface is amazing. Despite all my choices, I still chose Netflix. I just kept thinking, “That’s nice, but I already have Netflix.”

You have obviously made some great decisions at Netflix as the company is wildly successful. You’ve made some decisions that seemed crazy at the time, like dumping your set-top box on the eve of its release, that turned out to be the right ones. And I know you think this change you’re making is one of those decisions. You don’t want to miss the boat on streaming and not be the premier company in that space. You think this is a brilliant and misunderstood move and that time will prove you right. And I really truly hope you’re right, but I think you’re wrong.

Some companies — huge, untouchable, world-changing companies — slowly drift into obscurity (think IBM) and some companies fall almost overnight (think Friendster, then MySpace). What makes companies fall overnight is a shift in the collective mindset. Such a change requires a catalyst, that kick in the face I mentioned earlier. For MySpace users, the kick in the face was Facebook. And once you get kicked in the face it shocks you into seeing things differently. It’s like a spell is broken. And then, without even knowing exactly how it happened, yesterday you thought MySpace was irreplaceable, and today you’ll never log on again. Shifts in collective mindsets topple countries.

For Netflix customers, our kick in the face has been a triple whammy. First, there was a price increase. This was obvious and offensive to many people because it was so huge. This one didn’t really phase me. The second one was much more subtle and took a few weeks for its implications to sink in for me, the splitting of DVDs and streaming. By splitting them out, you created a new way of looking at your product. Before it was just a ridiculously large library of DVDs plus the added bonus of UNLIMITED streaming now and then when one of my shows or movies was available. It was a package that caused me to never think about either. Upon splitting I suddenly realized that they both suck for me. When I was forced to view DVDs separately, I realized I wasn’t watching nearly enough to make the plan worth it. And when forced to view streaming separately, I realized how deficient the library was, especially compared to other options. It wasn’t a viable product on its own. Before viewing them separately I never cared about this.

Yet, still, after all this, and hearing the grumbling all over the internet, I was willing to stay with you. I was going to pay the new price for both plans and go back to not thinking about it. That was until I heard about the third kick in the face, Qwikster. Companies don’t split up when they are successful. They grow and acquire. Companies have to be forced to split up by the government or they split up due to seriously bad financial circumstances. Your shareholders have shown you what they think of Qwikster. The explanation you give, wanting to promote the products separately, doesn’t make any rational sense. Everyone, from four-year-olds to 99-year-olds, knows what Netflix is and what it does. You could use that brand to sell anything even remotely movie-related. And trying to sell the skeletal remains that is left after removing DVDs as “Netflix” seems futile.

Why not use the gigantic cash-cow, that is DVD rentals, to fund the fledgling streaming business until that becomes a viable option? Everyone knows streaming is the future. Everyone wants that future. Eventually DVDs will die out naturally. You can’t force the market.

Please, Reed, make the crazy, rash, hugely disruptive decision to REVERSE your decision to split up Netflix. Give us back our old Netflix. Give us back the one thing that no one else was giving us: unlimited DVDs and unlimited streaming in a single package.

I love Netflix. And for the first time in twelve years I’m actually seriously considering canceling my account. Once my DVDs move to Qwikster, I won’t even have “Member since December 1999” on my account page. And while that seems petty, it means a lot to me.

Thanks for listening,
A Very Loyal Customer
Matt Walton

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4 Responses

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  1. mandee pearson said, on 2011/09/19 at 3:05 PM

    this is a very well written letter. well done.

  2. Dbo said, on 2011/09/20 at 5:33 PM

    This is a very well written response to recent Netflix actions. Nice job!

  3. Larry Kahaner said, on 2011/11/02 at 7:00 AM

    I thought you might be interested in my latest blog entry on business leadership titled “Why Netflix Lost 800,000 Customers” which appeared on the William G. McGowan Charitable Foundation website

    Larry Kahaner

  4. said, on 2016/04/18 at 10:20 PM

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