Because humanizing works.

[Obin Olson]

I just had to share this because it has such a "RED" feel to it.

The idea that humanizing a corporation is so powerful because evoking emotions make such strong decisions.

When you stop pushing and start caring, and let the transparency of of your passion shine, nothing is more powerful.

It seems Netflix got the memo:



"Dear *****,

I messed up. I owe you an explanation.

It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.

For the past five years, my greatest fear at Netflix has been that we wouldn't make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices. It wouldn’t have changed the price increase, but it would have been the right thing to do.

So here is what we are doing and why.

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service.

So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

It’s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated.

There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the Qwikster.com website is up and ready.

For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you.

I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

Respectfully yours,

-Reed Hastings, Co-Founder and CEO, Netflix

p.s. I have a slightly longer explanation along with a video posted on our blog, where you can also post comments."

 

[Elsie N]

Purchasing power really can cause changes. Good on them for recognizing they really screwed up, and are working to unscrew that. I just wonder if some sort of financial apology wouldn't help things along quicker.

 

[Clint Lealos]

I agree Elsie, accountability is scarce these days. Good on them

 

[Scott Crawley]

I got that too. You know what? It doesn't change my opinion that they are screwing up a good thing. I liked a cable alternative that gave me online and DVD access in one place with one bill. I preferred one comprehensive library that could give me both, and be managed in one place. I'm not interested in going to two different places to find rentals.

Yes they screwed up, and they continue to screw up, so screw them.

 

[Hrvoje Simic]

Nice approach.

"Humanizing a corporation" is an oxymoron, though.

 

[jake blackstone]

Good lesson to every corporation to think before unilaterally raising their prices. Since the price change announcement, Netflix lost 50% of the company value, ouch...

 

[Elsie N]

Good lesson to every corporation to think before unilaterally raising their prices. Since the price change announcement, Netflix lost 50% of the company value, ouch...

I agree. It's interesting that RED was able to raise the price of their cameras with hardly a whimper from us customers. I don't know if it was because they gave us such a long heads-up of the impending price increase or if it is because those of us who have already ordered are happy that the cameras we have coming increased in value with that price rise.

 

[David Battistella]

"Humanizing a corporation" is an oxymoron, though.

Technically, in the eyes of the law (organized society) corporation is an individual. The very essence of how a corporation is set up legally is based on the fact it is treated as a human entity.

David.


Reed us a very dynamic CEO. I got the chance to see him work last year and I was impressed by hiw he was with the team. If makes perfect sense that the correspondence is so personal.

 

[David Battistella]

I agree. It's interesting that RED was able to raise the price of their cameras with hardly a whimper from us customers. I don't know if it was because they gave us such a long heads-up of the price increase or if it is because those of us who have already ordered are happy that the cameras we have coming increased in value with that price rise.

M program will be seen in history as one of the greatest moves ever by a company. Raise the value of a product by almost three times the price you initially asked customers to pay. The real winners are the early adopters.

The first RED email offered tatoo for 28k in limited numbers, they sold 1200 M at 58k instead. Everybody wins in this equation, especially the customers.

Epic x customers should be absolutely joyous as "the wait and investment" has effectively been far far better than any stock could have performed over the same period.

A truly brilliant combo of excellent product, marketing and seizing opportunity.

 

[mikeburton]

The name change is ridiculous as is the two separate websites. I see this as nothing but a cry for help in the eleventh hour. They sure weren't sorry about raising prices before they actually saw the backlash that arose from it and they can't go back now that the company isn't worth half what it was a few months ago. Too little too late IMO.

 

[Curtis Stanton]

In what way did this work? Netflix stock is down to a 52 week low, having dropped over 9% on Tuesday. There are over 24,000, overwhelmingly negative, online responses to the apology.

 

[Elsie N]

In what way did this work? Netflix stock is down to a 52 week low, having dropped over 9% on Tuesday. There are over 24,000, overwhelmingly negative, online responses to the apology.

They just don't get human nature. In some cultures, if you kill someone you are unforgiven unless you pay the offended family some money. Then you are forgiven. They just don't understand how to receive (acquire) forgiveness.

 

[Michael Hastings]

Technically, in the eyes of the law (organized society) corporation is an individual. The very essence of how a corporation is set up legally is based on the fact it is treated as a human entity.

David.

Not to get too political, but have to take exception to that statement. The essence of incorporation is/was limited liability to its owners and perpetual life/immortality - neither of which is typical of a "human entity" (This is particularly as opposed to partnerships where death of a partner dissolves that portion of the partnership, and liability is shared by the partners - and is the reason the corporate structure was created.) in the beginning states granted corporations limited liability and perpetuity through ownership of stock - in exchange for a charter of particular purpose and an element of public good - NOT simply maximization of financial profit.

While broadening corporate permissiveness certainly has had some substantial positive economic effects it also opened the door to a lot of abuse and poor public policy. The consistent trend toward "human rights" for corporations by our judicial system has seriously distorted our political system, and by extension, policies for the public good and "real" human beings. Until we get "unreal" corporate money out of our politics it doubtful that things will ever get much better for any but the financial elite in America. To paraphrase Wall Street/Gordon Gekko "why would you wreck Bluestar (America)??" "Because it's wreckable! (and financially profitable in the short term).

 

[Obin Olson]

You guys are missing the point, what I was talking about what the emotional marketing that was injected in that email. It struck me that you can take the "big bad corporation" and "humanize it" with some PERSONAL marketing that is written from the heart of a HUMAN and uses empathy for another being instead of counting nuts/beans etc behind a curtain as most corporations do with things of this nature. The really high level guys are getting it, they call it "social marketing" I think but what it really is is PERSONAL COMMUNICATION with other HUMANS instead of sterile sales pitches or statements.

I for one received this email and had an emotional reaction that it meant to have on me, I "felt sorry" for this CEO for a moment as I read it. bingo, marketing well sold.

google: "emotional buying" and you will get some good results on the subject. Fun stuff.

 

[Obin Olson]

This is very closely related to the "self sacrifice" as well in script land, or the moment the hero commits to what may be self sacrifice for the one he loves, admits his wrongs etc... it's used to make the audience cry, done with a proper build and and enough of a reversal/arc/struggle for the character can have a profound effect on the audience participation in the gag.

 

[Scott Crawley]

OK then, instead of screw Netflix... screw Reed Hastings. ;-)

... Nah, I didn't buy into the personal touch as much as you did. Screw Netflix.

 

[Erik Franzén]

I call bullshit. This is damage control, nothing more.

If your CEO is forced to address the people because your stock is diving like there is no tomorrow then that is a sign of resignation - not of some sort "humanizing" element. RED isn't the only example in the book, of course not! But I don't think this is one of those down-to-earth guys - or if he is, maybe he ought to take a hint after what's happened; reversing policy now would look foolish but it'd be even more foolish to go ahead with the changes they've planned...

 

[Michael Olsen]

If your CEO is forced to address the people

I tend to agree, here. I think Netflix is having to talk to us as people because they made a bunch of closed door decisions - price increases, splitting into two separate companies, creating two totally separate queues, requiring two totally separate billing arrangements, establishing two totally separate websites, etc. And people are pissed at the choices they have made. Which makes sense. Those who only watched physical media will be largely unaffected, those who only streamed likewise. But anyone who used both just received a couple of significant hurdle in their path to enjoyment. And hurdle-free enjoyment is what made Netflix great in the first place.

Honestly, I feel sad. I used to really respect Netflix - they always seemed to be very upfront about stuff and were honest with their billing. If service was down and it impacted by viewing, even for a small period, or if they messed up and sent the wrong or a broken DVD, I always got an automatic refund. It may have only been for a few dollars, but it served the principle well.

Their decisions to force this on customers, however, makes me dislike them. I went from respect and recommendation to dislike and distrust in one day. That's a big loss for any company, because its ideological. And the ideological can be a lot harder to fix than anything else (i.e., even if they decided to remain one company, drop the pricing back down, and give everyone a free cupcake, I wouldn't be back where I was).

 

[Paul S.]

In my opinion he handled it poorly. I don't think it was about humanizing the corporation, I think it was about Hastings thinking he had figured out what he had done wrong and wanting it to look like he was personally making corrections.

In actual fact, I think he has still misjudged their error, and comes across pompous in telling us what his mistakes were. Then to dress up the business split as some form of redress... it's bonkers. Shareholders should be furious. I predict loads of case studies in business schools across the world, looking at how people that seem so on top of things can still screw their companies up.

In my opinion, these are strategic failings - Netflix has not adequately moved rightsowners along with the times, and they're paying the price. Netflix is massively staffed in the tech development side, but woefully inadequate in content licensing. Platforms come and go... content is king.

 

[Scott Miller]

I actually never saw the first installment. A friend warned me that my bill was going to change. I went to their website and found out it was going to double. Fortunately I dropped them 3 days before they sent the new, doubled bill.

Nice the get a letter, but if I had not been warned personally by a friend, I would have paid the double fee unsuspected as it is automatic. Would have been nice to get a letter BEFORE they doubled my bill.

They lost my $$ after having been a customer for a very, very long time. Glad I do not own any stock in their company!!