Commentary
How Will Netflix Respond to Social Media Backlash?
- by Erik Sass , Staff Writer @eriksass1, July 13, 2011
Thank you Netflix, a.k.a. the company who kicked the hornet's nest! After all, it's not every day the Internet gives us such a great case study illustrating both the potential and limitations of social media as a tool for interacting with, and attempting to shape or at least placate, public opinion. But Netflix has done that with its 60% price hike, which has not been, um, well-received, to put it mildly. The big question is: how does Netflix handle the social media explosion?
Responding effectively to public dissatisfaction is especially challenging for Netflix because it will be largely a rhetorical exercise -- persuasion, conciliation, call it what you will. Netflix had to know that subscribers would take exception to a big price hike, coming as it did amid continuing economic woes and growing consumer "fee fatigue." And since the company proceeded with price hike anyway, I'm guessing it already took all this into account and isn't going to back down.
All that's left to do, in this case, is to attempt to explain why the price hike is necessary and persuade subscribers that it's still worth holding on to their subscriptions. In other words, Netflix can't use some of the most effective customer service/PR tools, like offering freebies, which are great for making problems go away on social media.
And they do have a problem: as of this morning there are over 10,000 posts on the Netflix blog and 29,000 posts on its Facebook wall lambasting the company for "gouging" its customers. Here's a representative (if unusually pithy) one: "Dear netflix: Fuck you." Another opines: "Netflix is just one more example of the greed that is killing our country." Many comments urge other subscribers to try alternatives like Apple, Amazon and Hulu.com.
In short, it is a perfect social media storm: when your customers are using your company's own social media profiles to recommend competitors, amid an online tornado of profanity and bitter invective, it's safe to say you done screwed up. I look forward to seeing how Netflix handles it.
Erik Sass is editor of Publishers Daily. You can reach Erik at eriksass@gmail.com.
Not sure why people are surprised. Netflix has no choice.
1) content acquisition cost are going up significantly.
2) I think NFLX wants to move to a streaming only model. Mailing cost are rising and if they could eliminate this business think about the money they could save.
3) NFLX still has a pretty big price umbrella vs. cable and satellite so why not raise prices and increase profitability.
They will clearly need to demonstrate that they are investing this money into better content. If I'm not mistaken, I think they have been recently. Perhaps this investment is partially responsible for the fee increase.
They better respond sooner rather than later - over 30,000 comments later and still no response from Netflix. So far they have been deleting the more obscene comments. There is no sense in waiting to see it the number hits 100K by the weekend.
It;s only a price increase if you get both DVDs and streaming. Since I can't afford broadband and can't stream, I;m going to be saving a few dollars each month. So it's really a good deal for people like me - right now, we're paying for a service we can't use.
I do think that if you get both, there should be some discount on the price.
There is a very simple solution to this (rather than wasting time blogging) -- Quit Netflix. Which is EXACTLY what I have done as a subscriber.
At any given time if people were to boycott corporations that fleece them, I guarantee you that the prices will come down faster than you can blog your anger/frustrations/regret/hate et al.
There is POWER in numbers!
They have no choice but to raise their prices. A 60% increase that is opt-out will offset the small % loss of customers. They just renewed their NBC streaming deal at a rumored 10x what it cost them last time and most of the comments on Facebook were ridiculously uninformed. If people can't pay a 60% increase then those people have much bigger issues. It really isn't a lot of money - people just like to complain
In this case I think Netflix just needs to ride out the storm. They have mad a decision that obviously they need to make for their business and must have known that customers would be upset. Still, unlike the Gap and many other companies, they should act with confidence and let the world move on to the next issue of the day.
People are throwing around this "60% increase" as if that were true for everyone. It's not.
In the first place, as I mentioned in my earlier post (although not in exactly this way), it's really a price restructuring, not an increase. Some people will have their price go up, for others it will go down.
Second, even for those who have a price increase, it's not 60% across the board. For example, currently the 3-DVD plus streaming plan is $19.99, after the change it will be $23.98 - an increase of $4 - that is NOT 60%.
I think it is an equitable price hike. As another one of those people who can't afford a TV that streams (and doesn't think its enjoyable to watch movies on a tiny computer/phone/laptop screen), I only use DVDS, so I shouldn't have to pay to support their streaming business. The studios are demanding a bigger cut of streaming revenues, so they are passing that directly along to those who use that service. These streaming charges aren't far behind for the competition. Netflix was just the first to get screwed by the studios.
Another thing, they do a huge business via movie buffs who watch movies that aren't available to stream (old, indie, foreign, arthouse), and as one of those people, I could care in the slightest if I can stream the newest action flick or rom-com release or not. They won't get rid of DVDs anytime soon. Longtime loyal customers like me are their bread and butter.
It's not about what Netflix did, or even why, but how.
Even for those folks who do stay, Netflix, intentionally or not, has planted an active seed for customer disloyalty.
It is not too late of Netflix acts quickly and appropriately to reverse that tide with some humility and alternate strategies that still support what Netflix may need to do, but in other ways.
Ironically, it's a great opportunity. I wold love to roll my sleeves up and take in on in a way to make it a win for Netflix and Netflix customers alike.
If their Twitter account is any indication, they are going to pretend like nothing happened.
Not sure if they are managing this in-house or not, but it's been three days and not a peep out of them #EpicSocialMediaFail
When someone says "It really isn't a lot of money - people just like to complain" we probably need to look at a couple of similar scenarios and use the same logic
1) Airlines charging for food/bag checking/pillow et al: It's not really a lot of money. If you can afford to fly then you can afford to pay for those ammenities that really should be free.
2) Oil: When it goes up a dollar or two, it really isn't a lot of money. If you can afford a car then a couple of dollars is bleh.
3) Phone charges (taxes, 911, roaming, exceeding your minutes, adding a line et al): It isn't really a lot of money. If you can afford a phone (especially smart phones) then an extra couple of dollars is nothing
4) Parking Tickets/Traffic violation fines: If you can afford a car (especially high end ones) then a $100 fine is really not a lot of money.
5) Insurance: If you have a job and have insurance but have to pay high deductibles, out of pocket charges et al, then it really isn't a lot of money, after all you have a job (there are many without jobs).
6) MTA raising fares should not be an issue, after all, it isn't really a lot of money. People just like to complain
7) Con Edison (Delivery charges, Function charge, NY state charge, GRT Tax, Sales Tax et al): Granted this is a basic necessity but ridiculous charges add up non-the-less, but using that LOGIC, it really IS NOT A LOT OF MONEY so we should just pony up
The point here is, regardless of Netflix or any other corporation raising feels, people have the power to say enough is enough and cancel their subscription and as long as that doesn't happen, corporations can do whatever they want and people will just whine and the story will be forgotten within a week.
Good point Khalid, and well said. On a related note, I agree that $5 may not be a lot of money, but I think there is a risk of "fee fatigue" -- the sense that every company seems to have its hand in your pocket, and even if it is a small amount, it begins to add up. It's not that any one company is charging an exorbitant amount. It's a "tragedy of the commons," everyone taking their little bit until the consumer feels compelled to make some kind of large-scale change, e.g, giving up cable, going to another phone plan, etc.