(Photo from http://metroland.net/2011/09/21/who-are-you/)
Their logo is about as simple as simple gets (its right in the middle of the envelope) but perhaps it was the choice of color - red - that really did it. Whenever I see that Netflix red who else will I think of? Well, maybe Coca-Cola.
So Netflix has established an iconic business identity that many companies long for: instantly recognizable logos and a smiling, handsome spokesperson CEO, Reed Hastings. (Check out his spin: http://www.nytimes.com/2011/10/23/magazine/talk-reed-hastings-knows-he-messed-up.html)
(Photo courtesy of https://signup.netflix.com/MediaCenter/Management/ReedHastings)
Some commenters to this blog think that Netflix got touched with a bit of hubris as ‘Kearnsj2.0’ noted, “I have to say i think Netflix had a to[o] big to fail mentality…” DAB1 pointed out, “…this looks like a classic example of ‘We’re on a roll and can do no wrong…’” Cecilia, Michele, Jon, and DAB1 all agreed that it was a stupid move on Netflix’s part try to move the company towards purely streaming media as it did.
But there was one lone voice, lucyslallations, who thought, “Maybe Hastings is trying to move everyone over to the ‘on-line’ rental business and away from mail order model.” Could it be that we have all been played by Netflix? That this latest move is not so much of a blunder as a strategic business decision to do what Hastings has said he was planning to do all along: move to pure streaming over the net?
A move like this could not be possible if the company’s position was not as strong as Netflix’s is in regards to brand recognition, loyalty, and perceived value. After all it is right there in their company profile (http://ir.netflix.com/): “With over 25 million members in the United States, Canada and Latin America, Netflix, Inc. (Nasdaq: NFLX) is the world's leading Internet subscription service for enjoying movies and TV shows. For $8 a month, Netflix members instantly watch unlimited movies and TV episodes streaming over the Internet to PCs, Macs and TVs.” Notice the subtlety? “…Internet subscription service…Netflix members instantly watch…” but no mention, at this level, of DVDs by mail.
You cannot say that Netflix isn’t authentic. All along they have said this was the direction they were taking their business model. Of course all the content producers are extremely worried about these new models yet early on giving Netflix content at cut rate prices because net streaming was novel. Now they are genuinely anxious because Netflix works! They may have lost 810,000 subscribers but they still have 25 million members and their appetite for bandwidth isn't slowing down at all. In the October 31, 2011 edition of Multichannel News, Todd Spangler headlined: Netflix Streaming Isn’t Slowing Down, Despite Steep Sub Loss, It Now Eats Up 33% of Downstream.
What it comes down to is the methodology behind taking bad medicine (increase costs/prices). Do you take it all at once or dribble it out in small increments? I believe that Netflix felt that the all at once approach would better protect their brand from being tagged with the accusation price gouging.
So what do you think? Have we all been played by Netflix? After all is said and done they did control a big piece of the news cycle for several days and they are on their way to reaching the goal of being “Net” Flicks.
Well, I do agree - they definitely kept media focus on them for a prolonged period of time - enough, honestly, for what I believe to attract those without netflix (much like myself until recently) into seeing that they were doing online streaming for the more "couch-inclined" (Also me...which means I'm lazy and don't want to get my movies from a mailbox).
ReplyDeleteI think we've all been a bit played - I think the play wasn't towards the customers, so much as those that weren't customers yet.
Netflix may have been overconfident with the Qwikster idea, but honestly I think they were just a little early. In a few years, I wouldn't be surprised to see the mail order business dissolve anyway. It's just the way film renting is going with itunes, amazon, etc. Netflix still has the most recognizable name in the business though.
ReplyDeleteIt reminds me of the situation every time Facebook is updated. Everyone complains for a few weeks then completely forgets what it was like before.
Yeah, I believe you two have it right. Netflix is very forward thinking and is willing to take a few punches for the publicity, the short attention span of the public, and to move to their state goal of providing media primarily through streaming.
ReplyDeleteI have to agree with Tom. Netflix knows the future is streaming. They just mistakenly thought the future was now. It's the reasoning behind both of their recent flubs trying spin DVDs out as Qwikster and changing the pricing structure focus.
ReplyDeleteI think you've done a very good strategic analysis of your chosen company. It all makes good sense, especially the part about delivering all the bad news at once.
ReplyDeleteIt is also a good example of how being first can play a significant role in helping you execute a complex and momentarily dangerous strategic maneuver.
Look,too, at how this interacts with what we've said in class. A low-cost, intangible product in which high delivery charges play no role is an ideal candidate as a web business.
Also, note that they were first in a clearly defined space, applied maximum force where it was most appropriate, took optimum advantage of timing, and had the ability to implement.
So far, so good, but unlike other areas (football, for example, where there is a time limit), in business, strategy continues as long as the company does. If "it ain't over til it's over," then in business, it's never over.
People either love NetFlix or hate them. I wonder why there are so many diverse feelings about this company? (Most people are not subjecting the company to a study like you/we are).
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