If you subscribe to Netflix, or if you read the business press, you surely are aware of the recent changes to its business model. For many Netflix subscribers, including me, the separation of streaming and DVD services resulted in a 60% rate increase. My response was to drop the streaming (more convenient, yes, but far worse selection). More people than expected either dropped one of the two separate components or left the company completely (Netflix’s gaffe may turn out to be Blockbuster’s salvation). The stock tumbled.
Today I received an e-mail from Reed Hastings, Netflix’s CEO, apologizing for the way the price increase was handled, but going on to compound the initial error by explaining that the separation between streaming and DVD would be extended to renaming the DVD company and soon employing completely separate web sites. This move seems calculated to move any remaining customers to one service or the other, most likely to make the DVD component easier to sell, and that may be the intent. Why would anyone wanting to watch a particular movie search two web sites to determine in what media it is available?
When I started with Netflix, in the pre-streaming days, I was impressed with its responsiveness and its great customer service. I bought the stock and recommended the service to all my friends. When streaming was added, it was a great lagniappe that allowed viewing in between disk deliveries. More for the same price – what a concept! The company’s recent moves are so out of touch with that tradition, especially considering that the same CEO is in charge, that one has to wonder if he’s been possessed by some MBA spirit demon.
I understand that the DVD by mail model has become a costly alternative to streaming, and that the uncertainties surrounding the postal service do not make it more attractive. However, while streaming may serve the bottom line interests of Netflix, and some of its customers, I and many others are more concerned with selection than with medium of delivery. If the separation of services is part of some grand Netflix plan to become a streaming only company, Netflix had better improve its streaming content (and recent developments with Starz seem to indicate it’s actually going in the opposite direction). And if its DVD by mail operation becomes a red-haired step child and service standards are not maintained, it will lose customers like me, as well. It’s very sad to see what was a great company – to both shareholders and customers – flame out so spectacularly. The Hastings letter at least showed some self-realization; let’s hope it’s followed up by some constructive actions.
I receive my phone and internet service from the local cable company. I’d had the internet service for years (I bought “Road Runner lite” through AOL when I left dial-up; it’s slower than regular Road Runner, but fast enough for me, and it’s only about $25 a month), and I added the phone service a year ago, taking advantage of a one-year promotional rate of about $20 a month). I’ve been happy with the phone service, and planned to continue it if the price didn’t go up too much.
A few weeks before my year was up, I received a mailer from TWC advising that my phone rate would go up to about $40 a month, and inviting me to call to find out about other offers. I called, received a fairly hard sell to sign up for a package with cable TV (in which I was not interested), and finally offered another year of phone service for $25 a month. The catch was that I couldn’t be offered a promotion while I was on a promotion – I had to call back the first day after the promotion I was on expired. The rep promised to mark my file so that I would be able to take advantage of the $25 price when I called back.
So I called back as instructed, and was told that promotion was not available, but something not as good was. I asked the rep to honor the promise that was made to me, and, after threatening to look elsewhere for phone service, was actually offered a lower rate than I pay now. It seems like the threat to cease being a customer brings up on the customer rep’s screen a whole hidden menu of better offers than are available to existing customers seeking to renew but not threatening to leave.
Far be it for me to tell large companies how to run their businesses, but, even though I’m happy to have phone service for another year for a few bucks less than I had been paying, I would have preferred to have been offered the best available price when I called the first time. Each call takes a long time, what with identification verification, account review, etc. But, if that’s the game, I’d rather play it than not make the call and pay $20 more a month for the same phone service.