The Long-Term Damage to the Netflix Brand

When Netflix announced earlier this week that it would be putting the kibosh on Qwikster before it even launched, the entertainment company’s customers (those that haven’t already taken their movie-watching business elsewhere) were pretty happy. But was the damage to the Netflix brand already done?

In today’s guest post, Barbara Apple Sullivan, founder of the brand engagement firm Sullivan, proposes five reasons why the harm to the Netflix brand may very likely be irreparable.  Sullivan founded her firm in 1990 after a career in the financial services industry. The firm has worked with clients including American Express, BlackRock, and UC Berkeley.

Click through to read on.

Netflix: No longer in my instant queue by Barbara Apple Sullivan, founder of Sullivan

As we all continue to mourn the loss of Steve Jobs – a true visionary in the technology space who pushed the industry to a place it didn’t even know it wanted to go – we are also, in stark contrast, sitting back and wondering aloud: what the heck was Netflix CEO Reed Hastings thinking?

Jobs was notorious for disregarding customer sentiment in driving new products to market. He felt he knew better than us. And he, unlike Hastings, was usually right.

At Apple, Jobs was always inventing new gadgets and improving upon them to keep customers addicted. At Netflix, a glorified entertainment courier, Hastings’ restructuring and re-pricing alienated its users. These are two things that, with proper research and foresight, should be managed safely – but clearly were not.

From where I’m sitting, the outlook for Netflix isn’t great after this latest snafu.  Sure, Coke recovered from its New Coke debacle and Pepsi re-embraced its caramel-brown roots after Clear Pepsi disappeared from the shelves.  But in this case, the long-term implications of such flip-flopping are not good for the once-revered Netflix and here’s why:

  • The initial decision by Netflix to separate its DVD and streaming offerings into two brands reveals a serious lack of understanding of their business and competitors. They didn’t recognize the equity they had in the Netflix brand nor did they necessarily pay attention to customer research – both of which should have dissuaded management from deciding on a split.
  • The organization’s subsequent decision to recombine the two businesses before they even parted ways – while the right move – seems to have been done hastily and with little homework; and leaves me to wonder if there really is any method to the madness.
  • It seems no lessons were learned from this summer’s price hike and PR meltdown, as communications around the Qwikster reversal have also been questionable at best. Hackneyed apologies, convoluted explanations and rogue Twitter handles do not breed customer or investor confidence.
  • Contracts with DreamWorks and AMC’s “Walking Dead” will do little to ease complaints that Netflix’s streaming library doesn’t contain enough compelling content – especially when Starz and Sony have already left the party and Walt Disney may be following shortly.
  • With dwindling content and a rocky foundation, it’s not clear what the value proposition is for Netflix moving forward. What is their competitive difference?  There are plenty of other companies around the periphery of on-demand entertainment that have a stake in the game and are ready to move in and fast.

Hastings’ decision to place Qwikster in the return envelope was the right one. But by being cavalier with the Netflix brand, Hastings has left the door open to a very crowded room.