How Netflix lost a year, and our confidence

Looking over the wreckage of ill-considered price hikes, ill-advised videos, and the ill-conceived Qwikster spin-off, it's hard to reconcile that Netflix of the last tear with the savvy, disruptive, almost prescient upstart service that was a favorite of iPhone, iPad, and Apple TV users. Yet CNET's Greg Sandoval has done just that, and lays the blame cleanly at the top.

[Netflix CEO Reed] Hastings was wrong. The price hike and the later, aborted attempt to spin off the company's DVD operations enraged Netflix customers. The company lost 800,000 subscribers, its stock price dropped 77 percent in four months, and management's reputation was battered. Hastings went from Fortune magazine's Businessperson of the Year to the target of Saturday Night Live satire.

Netflix still hasn't recovered from that single season of folly, and even if they one day do manage to succeed beyond their previous highs, or beyond anyone's wildest expectations, it still cost them a year, a fortune, and a large part of their reputation.

It's what happens when any company forgets what their business is, and who their customers are -- including the Apples, Googles, and Microsofts. Missing the mainstream PC market cost Apple years and billions; missing the internet and mobile cost Microsoft years and billions, and missing social cost Google years and billions.

Reed Hastings stopped listening, and that's when the trouble started.

It's a cautionary tale for any business, and it happens more often then we'd like to admit. Smart, creative, powerful visionaries start to think they need no editing, no argument, and no second guessing.

It's why we got everything from the Star Wars prequels to Qwikster. And it's something any successful company needs to be scared to death about, and relentlessly working to avoid.

The article is long, but definitely worth a read. Arguably this was a vital lesson for Netflix to learn. Apple found out once that everyone is beatable, and they came back stronger. Netflix could as well.

Source: CNET