Netflix: Crisis of Communicaton?

It turns out that I was wrong! Netflix does allow for customers to respond to their blog. I discovered this when ascertaining who was the go to person when Netflix has a crisis. If you go to http://blog.netflix.com/2010/09/we-blew-it.html you find a blog by Steve Swasey, the VP of corporate communications writing about some incident that happened during the launch of Netflix in Canada. There are comments following his mea culpa and an opportunity for you to enter comments as well. 

So I apologize for my previous posts where I thought Netflix was pure Web 1.0 and lacked collaboration. However, it did take me five weeks before I stumbled across this post that allowed repartees and there are still no ‘comments’ on the main Netflix blog page (can you find it?). 

In the midst of crisis what’s a Netflix to do? Well, this past summer they had three crises that affected two large groups of stakeholders: their customers and their shareholders. Here’s what happened 1. they doubled their price with very little, if any, warning to customers; 2. they introduced and then quickly withdrew a ‘new’ service called Quikster which was supposed to handle all DVD accounts; and 3. they lost new media content when negotiations to renew their contract with Starz Entertainment failed.

Image from: http://prestigeagency.wordpress.com/2011/10/21/can-netflix-save-itself/

If you look at my first blog you will see what kind of pounding Netflix stock took on the heels of these events. They went from a 52 week high of $304.79 to $79.40 on October 26, 2011. They also lost over 800,000 subscribers. I believe that qualifies as a crisis in anyone’s book. So how did Netflix respond?

As I suspected the CEO, Reed Hastings, was the most visible spokesperson on behalf of Netflix. On September 7, 2011 he was the point person who addressed Netflix’s response to losing the Starz Entertainment account on CNNMoney. You can watch that here. After losing more subscribers than expected again it was Reed Hastings who made a conference call to investors to whom he owned up to making mistakes in the way they raised prices and in the ill conceived and short-lived ‘Quikster’ service. (read more)

It would appear that the strategies in place at Netflix to address crises is to allow Mr. Hastings to be the public face of Netflix while Mr. Swasey, and others, work the blogs behind the more public scenes. But that’s how Netflix responds to customers and investors. What about Big Brother? The US gov?

According to a report in The Hollywood Reporter (December 1, 2011) Netflix has just hired a former Skype executive to head global government relations. His name is Christopher Libertelli and he’ll be replacing Michael Drobac. (see the Hollywood Reporter story here). This is a very shrewd move on Netflix’s part as Mr. Libertelli is the former legal advisor to the chairman of the FCC.

I really believe that for crisis communications to be as effective as possible it is crucial that a response be made immediately, that culpability be honestly and forthrightly addressed, corrective steps (or restitution) be laid out plainly, and a clear vision of planning for the future beyond the crisis be stated as briefly as possible.

For the most part Netflix’s crisis strategies are pretty much on target. Through Mr. Hastings they made clear that mistakes were made and customers were taken for granted. This was done on the web and on various 24/7 financial and news programs. The only place where their strategy stumbled was in response time. They could have gotten out ahead of this story a bit quicker. Mr. Hastings expressed confidence that the content lost from Starz would be replaced by March of 2012. However, Netflix did stand its ground on the price increase.

It’s been a little over five months since the Netflix crises of summer. Judging from today’s stock price (December 2, 2011) of $66.63 (a new low) it would appear that significant damage has been done to this company and stakeholder confidence has been difficult to restore.

So what do you think? Did Netflix faithfully communicate through these crises? Or did their method of communication only add to the crises?

Netflix: Too Arrogant or Too Paranoid to Listen?

I searched high and low. Through keenly worded Google and/or Bing searches I tried hard to determine if Netflix utilized social media for inner corporate communications. Here’s the best I could come up with: they are a customer of a company called CodeHaus Xfire which lists Netflix as one of their customers for intranet services. 

So it sounds like Netflix just might utilize an internal intranet for corporate communications but after scouring their website and the internet I could not find anyone who offered any definitive information about Netflix’s internal corporate communications. Plus this ‘intranet’ service could be something totally outside corporate communications as Joseph Georgi suggests on his blog, “Did you really think that TV shows were always going to be called “TV” shows? Sorry, it’s all about the intranet these days (yeah, I said “intranet”—and I just did it again).” (Read more)

Netflix does have what it calls a community blog. That community allows anyone on the Netflix website, subscriber, employee, or not, to read the blog. However, only employees are allowed to post to the blog. In that regard I found this interesting tidbit in a posting on Wikipedia: “On January 1, 2008, a Netflix employee unofficially stated on the Netflix Community Blog that customers used the RTW page to add newly released movies to the top of their queues, then complained about delays in receiving them after demand outstripped the supply of DVDs on hand. By removing the page, Netflix sought to quell complaints that these movies were not readily available. Critics, however, have suggested this was just another Netflix attempt at throttling.”

Judging from this entry on Wikipedia there is an official procedure that an employee must go through before posting on the ‘community blog.’ Notice that it begins, “...a Netflix employee unofficially stated on the Netflix Community Blog...” This indicates, to me at least, that the community blog is not a satisfactory channel for corporate communications unless Hastings & Co. are attempting to keep as tight control over communications within the company as they do without.

An anonymous review of Netflix by employees was compiled by glassdoor.com. In that review there seemed to be a running theme among employees of ‘expect to get fired’ but for the purposes of this blog I found an employee who zeroed in on inter-corporate communications. 

Netflix CSR-1 in Hillsboro, OR reports (among other things)
“-no communication between ops and CSR's when new things are launched

Advice to Senior Management

Better communication about new NRD's or other things being launched.”

Again, a cursory review of the comments on glassdoor.com reveals a company that experiences high stress among employees. Of course constant fear of being fired is a strong contributor to this lack of morale but the inadequacy of inter-corporate communication adds to the stress as well. At present Netflix sounds again very Web 1.0 in its interaction with employees. Not terribly innovative in my book. 

I cannot help but believe that Netflix would become an even stronger and more innovative company if they would only tap into the creative potential of their employees. Here they could take some guidance from IBM. IBM was leery of inter-employee communications until they recognized the value of not only allowing but encouraging employees to engage each other in meaningful conversations about the corporation and its products. Argenti, in Digital Strategies for Powerful Corporate Communications points out how this turnaround at IBM, allowing “Jam Sessions” through blogs and other social media, strengthened the company in the section he titled, “Happy Days: Employee Engagement Fuels Loyalty and Resilience.” (pgs. 119ff)

So what do you think? Is it arrogance or is it paranoia that keeps Netflix from allowing their employees to freely communicate with each other and management? 

Netflix: Do they care about you or just your money?

In my last blog I pointed out the conspicuous absence of social media buttons on the Netflix site, not page, site. They did have a blog but it was their blog on their site that let them control their message. As a matter of fact they don’t want your opinion on their blogs since they do not allow any means of response (check it out here http://blog.netflix.com/). However, those little buttons for Facebook and twitter do appear if you want to spread their blogs around the web for them.

If Netflix’s flow of message is so one sided do they really care about you if you are a subscriber or do they care more about the stream of capital you represent? I think the answer to this is best illustrated in the manner in which Netflix handled their “New Coke” whopper of a blunder back in July. If you recall that’s when they decided to up their fees by 60% simply by splitting DVD subscriptions from streaming subscriptions.

For a company that so dearly wants to control its message they surely had enough savvy to follow the advice laid out in PR 2.0: New Media, New Tools, New Audiences, by Breckenridge, for developing a good social media release. Netflix could have saved itself a world of hurt if it had simply followed this advice in a bullet point on page 106: “With a social media news release, you can direct the journalist to the information you want to present and have him or her cover it in a story, which is a better way to control the brand communication.”

It is amazing to me that such a successful company could fail to make a simple announcement via Facebook and Twitter, with follow-up communications carefully planned through journalists/bloggers across the web. What did they do? Apparently nothing — silence on the social media front. Not a good strategy for a company living in a Web 2.0 world.

Instead Netflix let the change in product structure and pricing slip out without any organized releases or even a hint of a media kit of any kind being sent to anyone. One PR professional, Anne, crucifies Netfix in her blog (http://www.cookerlypr.com/2011/07/netflix-nixes-customers-with-poor-media-relations.html) since she is a customer but found out about these changes through a Facebook posting by a friend. 

She points out that Netflix did issue a Twitter announcement on July 12 but did not notify customers personally (at least her) until July 13 via email. By then the web was full of articles, blogs, tweets, and Facebook postings rich with umbrage. This SMR was well deserved and, here’s the point, the one Netflix put their energy into by doing nothing.

Some have suggested that this was shrewd market strategy on the part of Netflix to grab the business news cycle. I think that it clearly demonstrates hubris and an eagerness not to serve their stakeholders and customers first, no, priority lies only with the bottom line.

Netflix needs to wake up and begin genuine communications with their stakeholders and customers. This could start by allowing customers an opportunity to give feedback on their blogs – it really is as simple as that. Of course that would mean that their customers ideas and opinions are important to them.

How does Netflix view its customers? Like this?

Source: http://www.kitchenomics.net/customers-and-partners

Or this?

Source: http://www.wpclipart.com/money/money_bags.png.html

Netflix: Wants to be in your home but are they really that social?

If a business really wants to be present in the media world then their home page needs a few essential buttons:

(sources: Twitter button, Facebook button, and Blogger button http://www.newmissionacupuncture.com/; Google+ button - http://www.buzzom.com/2011/08/googles-1-button-gets-more-social-with-friend-annotations/; Linkedin button - http://www.jourisdictiondesigns.com/services3.html)

With these in place you can follow, be notified, and/or check for the latest information through a variety of social media. So let’s check Netflix’s home page.

(Source https://www.netflix.com/Default?mqso=80015652&mkwid=sTKO1SwZG&pcrid=7033233444&gclid=CNKrocXdnawCFUdn5QodPSc94A)

Uh oh! No buttons! Not a one! (That is unless you’re interested in signing up.) Netflix wants to get personal by streaming their content onto your personal devices and the TV in your living room but are they that social?

It turns out that you can follow Netflix on Twitter (http://twitter.com/#!/netflix), friend or like them on Facebook (http://www.facebook.com/netflix) or Google+ (https://plus.google.com/100777944721719582051/posts), or get all business like with them on Linkedin (http://www.linkedin.com/company/netflix). However, to do all this takes a bit of work on your part. Netflix doesn’t make it convenient for you to just click a button on their page, instead you’re the one that has to want to get social with them by chasing down their social media on the web. Wonder why?

Now if it is information you want, I mean the chatty, friendly kind, it can be found on their website. Look real close in the middle at the bottom part of the page. Strain your eyes enough and you’ll make out a button titled, “Blog.” Yes! There is an active blog on the Netflix site (http://blog.netflix.com/) that is eager to share with Canadians that Breaking Bad is now available north of the border. Also Netflix wants you to know that it is now available on Nook and that they are expanding their presence on Android devices. Plus, DVDs are still around if you really want those wonderful shiny little relics of the last century. But can you respond to a post? Not that I can see. So this information flows one way only.

Is it hubris that Netflix is so cavalier in its attitude toward social media? After all they are all over TV in commercials, all over the web in ads, and often in the news. Do they really need to push their brand and image that much more? On the other hand it is prudent to aggressively stake out as large a presence as possible in all types of media. Of course Netflix could argue that they are already there. You can find them on Facebook, Google+, Twitter, Linkedin, but not Blogger since they have their own on their site.

The lack of aggressiveness on Netflix’s part in the realm of social media could mean that they are much more interested in pushing their product and controlling their message than in being social. If that is the case then for a company that really wants to be Web 2.0 they seem to be smack in the middle of a Web 1.0 mentality with that attitude. What do you think?

Netflix: Have You Been Played?

In my last blog I questioned whether or not Netflix was ignorant or stupid. After all they have a ubiquitous brand. Those little envelopes that shuffled DVDs to and from subscribers are iconic.

(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.

Netflix: Ignorant or just incredibly stupid?

It’s not like Neflix is the new kid on the block. They’ve been around since 1997. They started out as a pure DVD through mail operation but Reed Hastings, their CEO, has made claims he visioned Netflix eventually as solely providing streaming content over the net from the beginning.

So what is Netflix all about? Dig deep enough on their website and you’ll come to a spot where you can download their logo (https://signup.netflix.com/MediaCenter/ImagesLogo). In those guidelines you’ll find: “For the love of movies. We do what we do because we believe in making it ridiculously easy for everyone to enjoy the TV shows & movies they love.” Looks like the mission of Netflix is to make it easy for you and me to sit back and enjoy our favorite shows - provided Netflix holds the rights to distribute them.

Reed Hastings was prescient when it came to his vision of streaming media. The business model of mailing out DVDs and dropping them off at your mailbox blew competitors like Blockbuster, with its mortar and brick stores, out of the water in the mid 2000’s. Netflix was a hit across a broad demographic with that model but Hastings sought to make using Netflix “ridiculously easy” and the best way to do that was to cut out the trip to the mailbox — stream directly to various media devices. This also targeted a much younger demographic and best of all it was possible to do once the world began the transition from Web 1.0 to Web 2.0.

In keeping with that vision, according to the company’s timeline (https://signup.netflix.com/MediaCenter/Timeline) in 2008 they teamed up with “consumer electronics companies to stream on the Xbox 360, Blu-ray disc players, TV set-top boxes and the Apple Macintosh computer.” In 2009 they get the PS3 and internet connected TVs and devices. In 2010 they’re found on iPads, iPhones, iPod Touches, the Nintendo Wii, along with other devices. Life is good! They end the year 2010 with 20 million members! What could go wrong?

Which brings me to the subject line: ignorant or just incredibly stupid? Hastings is on a roll, Netflix is flying high with stock prices in the $300 range. The company is worth billions. So why introduce an abrupt change in the winning business model that will, by the way, stick it to your customers in the form of a 60% price increase for your basic product which combined unlimited streaming and one mailed dvd? Sure! let’s split those two items and charge for each separately. I’m sure no one will mind or even notice.

Source: http://ir.netflix.com/stockquote.cfm

Well, as you can see from these charts customers and stockholders did notice and they were not very happy. After losing 810,000 subscribers (check out: http://business.newsfactor.com/story.xhtml?story_id=12100005TEBH) Hastings delivered a mea culpa but did not budge on the price increase or the new model.

Ignorant or stupid?