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Netflix CEO Comments On Recent Decisions
ExE122 writes "Netflix CEO Reed Hastings makes several comments about mistakes that were made over the past year. Hastings claimed, 'We moved too fast with it', [trying to exit the DVD-by-mail business] and explains that he still thinks Internet video will dominate in the coming years. From the article: 'Hastings also faced tough questions about last month's double-bomb disclosure: Netflix now expects to lose money for all of 2012, and it is looking to raise cash in a secondary offering of its stock.'"
At least, that's what you told me.
When did we as consumers decide to forgo quality over convenience? I recently tested Netflix. I was sorely disappointed with the quality of the video as well as the lack-luster audio quality. I quickly deleted my account within minutes of opening it. Until they are able to stream true HD sound I see no reason to give up disks. 7.1 is a beautiful thing...not going to waste it. :-)
The Post Office is in the process of shutting down, so everybody'll have to get off the DVD plan, anyway, just like we were trying to cajole them to.
I'm not a lawyer, but I play one on the Internet. Blog
I think that the decision to exit the DVD-by-mail market is a great one. Maybe it's just because I'm a college kid, but most people I know don't even bother renting DVDs anymore. As Netflix gains more and more licenses for various production companies, and their ability to stream online grows, nearly everyone I know has switched to exclusively streaming (I know I certainly have). Streaming is where the market is at, these days, since we're practically glued to our technology, particularly the internet.
Good on you, Netflix.
What shocks (and appalls) me is that Reed Hastings has made several horrible mistakes, has led his business from profit to loss, and he will still take home a multi million dollar pay package for 2011. It's about time he admit that he is willing to actually PAY for his mistakes, and forego his compensation for the next year since it will clearly be a terrible one for the business. Until then, Netflix is a sinking Titanic with an irresponsible madman at the helm, refusing to change course.
While I hate the idea that Netflix may not be around much longer, I'm not surprised. Mr. Hastings strategy seems to be focusing on maximizing contribution margins instead of maximizing profit. Getting one doesn't mean you'll get the other. What I don't understand is why Hastings believes that the major studios will allow Netflix to operate the online distribution at the price levels consumers demand. It is clear that Hollywood has no interest in lowering prices on digital content even though the marginal costs of distribution is minuscule. It won't be long before Netflix changes to a "on-demand" pricing model that Apple, Amazon, and a whole other set of competitors are already doing, and the recent exit of a third of their customers due to the recent price increase is a clear indication that Netflix is selling a highly elastic product. When will Hollywod ever learn that we don't want to pay 2.99 per episode for a show with DRM restrictions that force you to re-purchase the damn video for every device you have, and that paying $14 for a digital download when the DVD is selling at Wal-Mart, Best Buy, and Target for $10 is price gouging.
Surely Netflix is in a position to understand that video streaming as a market has been crippled by the MPAA. Physical media will not be killed by streaming because people cannot do the sort of things they do with discs when they using streaming services. I know quite a few people who lend DVDs to their friends and family members, including DVDs from Netflix. People still do not always have Internet access, or if they are away from home Internet service may be very expensive -- but it is easy to use a portable DVD player (I may not be up to date on this, but as far as I know one cannot simply download video from Netflix and watch it on a laptop). Connecting a computer to a TV is still a pain and it still is not widely done; people generally do not want to watch movies on a smaller computer monitor when a larger TV screen is available.
When the MPAA stops making life hell for people who want to use their PCs to watch popular movies, killing DVD rental services will be more feasible.
Palm trees and 8
I'm going to be unpopular but I love Netflix. I never used the DVD delivery service so that change didn't affect me, and I do understand why people who were previously on the DVD service would be upset about the changes. It seems like every time I get to a point that I "can't find anything on Netflix" that I'm interested in watching within a few days their contract/content/whatever changes and there's a whole new set of TV series, movies, documentaries, etc. that I'm interested in. I have a Roku box on all my TVs now and subscriptions to Netflix for movies and Hulu+ for stuff I want to keep up with that's currently being aired. Hulu and Amazon are shite for movie content and UI compared to Netflix on the Roku. The only thing that makes Hulu+ palatable is the subscription/queue so I can subscribe to all the shows I watch and then just watch the queue. The device/app/whatever that will really get my business is something that allows me to search all of my subscription services through a single interface and manage a single queue. That's the next killer app but it will take an act of Congress to make that possible.
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is to lose confidence in Netflix. They have a business model that should be how content is distributed by the cable companies. Everything on demand, cheap subscription rates, and access to older archives of content that would otherwise not be available except to purchase physical media, which consumers seem to be shunning.
The problem is that while the big cable companies are still struggling to maintain a greedy monopoly on TV content distribution, companies like Netflix are the necessary upset required to get these big companies making better decisions and offering better services. When Netflix was consuming the largest amount of Internet bandwidth, you know the big Telco companies started paying attention. A few decisions in the right direction and Netflix could replace cable services completely.
I do fear, however, that eventually Netflix may become extinct once big Telco gets into the game of offering similar services, but for now Netflix is the black sheep of content distribution and should be supported rather then complained about. For $7.99/mth I am accessing television and movies I have not seen before and no other service (cable, iTunes, movie rental stores) can offer me that value.
Its easy for people to b*tch about how poorly Netflix may have been operating their business, but in the end these same people will b*tch louder when Netflix shuts its doors for good.
I haven't thought of anything clever to put here, but then again most of you haven't either.
Blockbuster's site sucks compared to Netflix, and their disc mailing schedule is slower, but for me to put some pain in Netflix's wallet it has been worth it to me.
Giving money to Blockbuster won't pressure Netflix to improve streaming, Netflix already wanted that; it's every single movie producer that doesn't want it. And I presume both services have access to the same DVDs. So what are you accomplishing?
Starz was Netflix' biggest contract, and during renewal talks Netflix offered them ten times as much money to renew the deal. Starz still said no - not unless Netflix would make a special 'Starz' plan that cost more.
Big Content won't give Netflix a simple, reasonable streaming contracts because that's 'not the model'; they give Netflix the very last dregs of the market for a film, and when it looks like anyone might possibly be waiting for a film on Netflix rather than watching it somewhere else they stop giving Netflix streaming rights - and even try to fuck with their acquisition of DVDs.
It's content producers' obsession with gouging the shit out of every distribution channel and their delusional attempts to make internet video behave like premium cable services that keeps streaming shitty, not Netflix' management.
You hate Blockbuster, but you'll use it to punish Netflix. How about you show some contempt for the assholes holding the cards and pulling the strings rather than despising the companies that are trying to give you a cheap, convenient option for video?
But if customers aren't stupid they will notice decreased value of the service and switch to kiosk rentals.
Which have a Ron Jeremy-sized hard on for late fees- or at least, late fees under the new guise of charging you by the day. I don't know anyone who uses kiosks who doesn't pay as much or more in extra days as they did in outright penalties at old-school Blockbusters. You can say that people don't have to keep them for 8 days and this is true; people also don't have to pay the minimum on their credit cards or finance their cars, but they do and it's a predictable source of income for banks and car dealers. Much as extra days are a major source of income for Redbox.
Just because it's a machine in a parking lot and just because they don't call it a 'late fee' anymore doesn't mean the model is different. All they've done is remove the guilt and vindictive gouging from the process - and then promoted their new, spiffed up late fees as a convenience service.
Being the fan that I am for Google products, and also knowing that the cash is there and the possibilities are there, if I was Google, I would buy netflix, and voila instant stardom for youtube netflix merger.....!!!
Comments like this really annoy me. What has happened is that Netflix, a company that has kept rock-bottom prices for years, has been squeezed so hard by its providers that they're losing money hand over fist. Netflix is not losing money for all of 2012 because customers are leaving them.They're losing money because:
"Buying those rights is getting tougher, as studios are demanding more money for their valuable content. One analyst predicted earlier this year that Netflix's streaming content licensing costs will rise from $180 million in 2010 to a whopping $2 billion in 2012."
Netflix's cost of goods is increasing by more than a factor of 10. In light of that, I'm shocked that Netflix still managed to keep the cost to their customers down below $8/month (for streaming). Instead of sticking their customers with the entire increase, they decided to eat some of the cost by selling part of the company instead:
"Netflix now expects to lose money for all of 2012, and it is looking to raise cash in a secondary offering of its stock."
Now, would you rather stick with the company that is still trying its best to give you rock-bottom prices, or go back to the cable/phone companies who have spent decades trying to find ways to trick customers into paying more than you should (and who will go right back to doing it once Netflix has been laid low)? Unfortunately, human nature is such that most people (in the US, at least) would rather whine and act like Eric Cartman when they get upset than to stop and think things through. Netflix's competitors are betting on it, and unfortunately betting on the crappier side of human nature usually pays off for large companies.