What Can Our Company Learn From The Netflix Debacle?

By: Gregg Cohen, CEO

It’s 9:39 PM on Monday night, September 19, and I just got a very interesting email.  It was such an interesting email that I immediately put my new favorite TV Show, The Sing-Off, on pause and headed over to the computer to write an article for the blog.  (YES, I do watch The Sing Off with my fiancée.  The show is like a watching a fender bender on the side of the highway….you know you shouldn’t be looking, but you can’t help it!)

The email was from Reed Hastings, CEO of Netflix.  If you haven’t heard lately, Netflix has faced harsh criticism for the way it raised prices by 60% overnight a month or so ago, without any warning to it’s previously-loyal customer base.  And the stock price, which once topped $300 per share at one point, now checks in at $143.75 after another 7% drop, post-email. 

Personally, I was a loyal Netflix customer for the past year or two, and I referred at least 3 more customers there because I thought so highly of the company.  Heck, I even bought my Mom a subscription for Christmas!

The email starts off by Hastings saying “I messed up. I owe you an explanation.” 

I’m thinking to myself, “Well, this is refreshing…a CEO who cares.  Let me see what else this nice guy has to say….and, more importantly, what he’s going to do about the company’s mistakes.”

But, boy, was I wrong!  The email barely acknowledges the recent mistake and instead tries to justify its actions.  Hastings then goes on to explain why he is splitting Netflix into two companies, with two different websites, two different billing procedures, two different rating systems, and a bunch of other inconveniences.  Now there will be Netflix for streaming video and Qwikster for DVD rentals.  And there is absolutely no mention of how Netflix/Qwister/whatever the name of the company is now is going to make up for their past month of careless customer service.   (You can read the entire email on the Netflix blog by clicking here.)

This bothers me for a lot of reasons.  But here’s the main one: Netflix clearly doesn’t put its customers first.  If they had thought about that, they probably would’ve never been in this situation to begin with.  And now, on top of a ridiculous price increase, they now want their customers to change and learn a new company, with a new website, and yet another bill to watch each month.  They should change the name of the new company from Qwikster to Quit-ster, since that is what a large portion of their customers are doing in response.

Now, I’m not saying that you can never raise prices as a company, but if you do, there better be real value there.  And if you do, there’s a right way to do it.  How about giving folks a heads up?  How about grand-fathering in your past clients who have been so loyal?  How about doing anything other than sending out a lame email a month after the damage has been done?

There’s a lot that our company can learn from watching this debacle and the most important thing that I will take away is you must always put your clients first.  We must always be willing to accept short-term sacrifices in expectation of long-term success.  It’s like the great Zig Ziglar said, “You can get everything you want in this world if you’ll just help enough other people get what they want.” 

It’s not the role of business to be perfect.  Every business makes mistakes.  But the truly great businesses go out of their way to make up for those mistakes.

We’ll just see how Reed Hastings handles this one.


Gregg Cohen is an owner of JWB Real Estate Capital, one of the country’s largest real estate investment companies.  In the past 5 years, he and his team have bought and sold over 250 properties in Jacksonville, FL.  He speaks nationally to crowds of thousands of investors with this mentors, Than Merrill & Paul Esajian of A&E’s hit TV show “Flip This House,” and has been featured multiple times in the Florida Times-Union and the Jacksonville Business Journal.  He was a member of the Board of Directors for Jaxreia from 2009 – 2010.  In 2011, JWB Real Estate Capital was ranked as the #3 Fastest Growing Company In Northeast Florida.

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