In 2011, Netflix, Inc. (NASDAQ:NFLX) nearly went belly up after its ill-advised announcement of a price increase and a plan to split off its DVD business into a separate company called Qwikster. It’s not that either were necessarily bad ideas, it’s the fact that the announcements were made at the same time and no concern was given to how people might react.
Following public opinion that viewed the first announcement a mistake, Netflix failed to respond to these criticisms and just went ahead without concern to its customers. This of course, occurred before Netflix made a move into original programming and a potential second revenue stream. It was made when customers, and they still are, everything to Netflix.
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Netflix CEO Reed Hastings almost lost his job
“I realized, if our business is about making people happy, which it is, then I had made a mistake,” CEO Reed Hastings said to the New York Times this April. Hasting’s ill advised plan nearly cost him his job and saw Netflix, Inc. (NASDAQ:NFLX)’s stock implode. In July 2011, before the debacle, shares were at $295. They fell to $63 by November. On Friday, they were trading at about $246.
That return has largely been focused on making sure the customer always feels right.
Bloomberg reported in April that about 10 million people watch Netflix, Inc. (NASDAQ:NFLX) for free thanks to password-sharing. That number came from Wedbush Securities analyst Michael Pachter, who at the time said Netflix needed to restrict password sharing in order to boost revenue. While Pachter believes that Netflix could site piracy issues for cracking down on this, following the lessons of 2011, Netflix has done nothing and is taking a long approach rather than risking the alienation of its core business, its customers.
Netflix offers personalized user profiles
Today, Netflix, Inc. (NASDAQ:NFLX) announced that it would allow up to 5 users per account to build personalized user profiles so that your wife’s films aren’t recommended to you and vice versus, something that customers had complained about recently. You’ve probably read that Netflix is looking to become the next HBO, and while this may very well happen, it continues to show a commitment to its customers. Rather than trying to sell multiple subscriptions to families, they are going out of their way to accommodating what some might even call theft.
It’s an inspired business model that would make Nordstrom’s department stores applaud.