Why the Netflix Mea Culpa Backfired

Back in July, I wrote about the surge of social media criticism directed at Netflix after its controversial price hike, which raised the cost of its main subscription plan by 60%, noting that it was "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."  The big question, I wrote, was "how does Netflix handle the social media explosion?"

But I never would have expected the novel, unorthodox strategy adopted by Netflix to engage with social media critics: basically, it just didn't. Rather than respond to the outpouring of customer dissatisfaction, Netflix ignored the abuse and never tried to explain why the price hike was necessary and why it was still worth holding on to their subscriptions -- elementary questions, for which there should have been persuasive answers (presumably you don't piss off your customers that much without some bigger goal in mind, hopefully one that will benefit them too in the long term).

This neglect is all the more puzzling, in hindsight, because it turns out there was a long-term plan, which Netflix CEO Reed Hastings just revealed: Netflix created a new business with its own brand to handle DVD mailing, called Qwikster, and associated the Netflix brand exclusively with the streaming on-demand side of the business.

To his credit, Hastings tried to undo some of the damage to the company's reputation by accepting responsibility for failing to clarify what the company's plan was in the first place, admitting that the unexplained price hike was a high-handed move resulting from "arrogance"; Hastings also sketched out the reasons for the move -- mainly Netflix wanting to stay ahead of the ball as more viewing switches to online streaming.

But these humble genuflections were comical, and indeed even more high-handed and arrogant, coming as they did a good two months after the initial controversy. The appropriate time to offer these explanations was immediately after the initial wave of criticism -- not several months later, during which negative impressions of the company can become entrenched in consumers' minds. No surprise, the company paid a price for this, with some subscribers canceling their service, future subscriber projections lowered, and the stock price taking a hit to boot.

The whole thing is frankly mystifying to me: how could a major, publicly-traded (and generally popular) company go about its social media communications -- and indeed its broader business strategy -- in such an incredibly inept, half-assed fashion?

And don't even get me started on stoner Elmo.

2 comments about "Why the Netflix Mea Culpa Backfired".
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  1. Jeff Rutherford from Jeff Rutherford Media Relations, LLC, September 23, 2011 at 3:44 p.m.

    Stoner Elmo indeed. It appears as if someone at Netflix has been smoking something that alters common sense, wouldn't you say?

    Agree completely with your assessment. A company that probably spends a serious chunk of change figuring out, "How can we get more of our avid users to share what movies their watching and spread the good word about us via social media." drops the ball so fundamentally. People are screaming via every channel available about our price increases, and our social media strategy = not saying a word.

    Hmmm, I think you're going to see this happen more and more often. Companies want social media to be a true one-way, broadcast channel. Go out and do free marketing for us, but if we stumble don't expect us to respond to you via social media.

    While we're at it, Netflix certainly isn't alone. It's pretty funny watching Apple try to grok social media.

  2. Pam Alvord from Kilgannon, September 23, 2011 at 5:43 p.m.

    It's been a tough week in the branding world, with Netflix, The Ladders and Facebook all making major changes that appear to ignore the customer entirely. If Netflix can recover, it will be a new case study for the Marketing 101 text book, if not, it will be the latest branding horror story.

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