Friday Four: Four Things NOT To Do If You Own a Movie Company

Posted by · October 28, 2011 7:25 pm

The title of this week’s Friday Four probably doesn’t need much of an explanation. Most of us have been following the car wreck over at Netflix, which, just like a car wreck, is hard to stop watching. Losing 800,000 subscribers in the third quarter alone, Netflix finds itself fighting an uphill battle after share value plummeted nearly 75 percent from $300 per share down to a meager $80 per share. And yesterday, Redbox seemed to think that following Netflix off that cliff was a good idea.

Because of this concerning trend, I can’t help but feel compelled to intervene. So, if you’re reading this and happen to own a movie company like Netflix or Redbox, this is an intervention. Before you get the idea that you can do exactly what these companies are doing and come out better on the other end, let me be first to tell you: It’s not a good idea. In fact, it’s insane.

Now listen up.

DON’T #1: If you’re winning the game, don’t punish your fans.

You know what I’m talking about. Both Netflix and Redbox made the mistake of thinking that their brand reputations were enough to make price hikes a relatively minor issue. Unfortunately for both companies, consumers thought otherwise, and stock prices plummeted.

If you’re still dead set on raising rates, at least don’t apply those hikes to existing customers. If Netflix had only raised rates on new subscribers, chances are it would have seen an increase in membership, though likely smaller than it would have been with no hikes at all.

If your company is more like Redbox, just don’t raise your rates. Don’t do it. The fact that you rent movies for a dollar a day is what makes you so appealing. Not only is upping the daily rate to $1.20 far less pleasing to the eye, but updating every kiosk to reflect that price isn’t going to be cheap.

DON’T #2: If subscribers are mad at you, don’t try to change the subject when you apologize.

Even after Reed Hastings raised the rates at Netflix, he still had a chance to salvage Netflix’s relationship with subscribers by owning up to his mistake and reducing rates for existing subscribers. Even if he chose not to go back to the original rates, a simple rate cut would have gone a long way to restore good faith.

But instead, Hastings decided that dangling Qwikster in front of members was sufficient. To this day, I am still not sure how he expected to repair the Netflix brand image by trying to divert attention to a new service that ultimately never left the ground. It’s almost as if he tried to get people upset about Qwikster in order to distract them from the price hikes. Unfortunately, when Hastings announced that the new service was a no-go, consumers still hadn’t forgotten about the hikes.

To be sure, consumers aren’t so forgetful when they’re treated like fools. In fact, they’re known for holding onto things like that for a long time.

DON’T #3: If recessions make your service more appealing, don’t let greed get in the way.

If there’s one thing that’s certain during times of economic uncertainty, it’s that consumers start cutting additional costs. Among those things that get cut are going out to eat, purchasing nonessential goods, and going to the movies. One of the most appealing things about a service like Netflix was the fact that users could get unlimited streaming and rent DVDs for less than the cost of one ticket to the theater.

Once Netflix raised the price, that appeal all but disappeared. At least it did for 800,000 subscribers.

DON’T #4: Learn from the mistakes of your competitors. Don’t lose your sanity.

Now that Netflix and Redbox have experienced harsh ramifications for being short-sighted, don’t let yourself be fooled into thinking that your company can try the same tactics and get a different outcome. Don’t let the mistakes of your competitors be your mistakes too.

Instead, capitalize on the opportunity to be the hero to hundreds of thousands of disenfranchised consumers. Emphasize the fact that your brand is about providing a reliable, consistent service and cultivating a respectful, mutually beneficial relationship between company and member.

If there can be a single, succinct moral to this story, it’s this: Don’t be fooled into thinking that Netflix and Redbox will cushion your fall if you jump off the same cliff. Chances are you’ll end up being a stair as they climb their way out.

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