Lost Opportunity: Netflix’s Reed Hastings blows the apology (Part I)

Posted By on September 21, 2011

This is the first in a two-part series on Netflix CEO Reed Hastings’ attempt to apologize to subscribers for recent changes to the service and fees. In July 2011 the company announced the DVD-by-mail and streaming video service would be charged for separately and that the combined Netflix fee increases would be up to 60% higher than the previously bundled fee. Netflix subscribers were outraged and left in droves (over 1 million at the time of the apology) and the Netflix stock price dropped from $292 to $130 per share. In this post, we will talk about what Reed did wrong in his video and in the second post we’ll talk about how to avoid his communication mistakes.

Yesterday, Reed Hastings apologized for failing to personally communicate the changes to Netflix subscriptions and fees announced in July. Today, Wall Street reacted with a drop from yesterday’s $162 high to today’s $130 close. The social media channels are flooded with blistering criticism. The press are writing story after story about the failed Netflix apology. Clearly his communication wasn’t effective. And it’s costing him.

In fact, his apology made the problem worse.

Mr. Hastings was responding to losing over 1 million subscribers since the fee announcement and to the dramatic drop in stock price (from $292 the day of the July announcement).

Clearly something needed to be done.

Mr. Hastings decided to go directly to the subscribers and public and make his case. He reached out to the subscribers by email and used the corporate blog and a video (oddly referred to as a “short welcome video” in the blog post) to reach beyond the subscribers to the general public. So far, so good.

Let’s watch the video


The video was shot in an outdoor, casual setting and his relaxed, calm body language suggests he is approachable and sincere. He looks directly into the camera and his vocal delivery is confident and clear.  All good. However, his message is about him and about Netflix – not about subscribers or potential subscribers.

The message is completely off the mark.

It’s the subscriber, stupid

People are mad about the price increase. His message? “I should have communicated the change myself.” What?? People weren’t mad about who communicated the message. They are mad that they have to pay up to 60% more for the service. They want to know: Why did this happen? What do I get for the additional money? No answers are given.

Further, Mr. Hastings talked about why the DVD-by-mail and streaming services needed to be separate – for Netflix (different cost structures, International reach, etc). No mention of why separate services are for good for subscribers.

Then he added insult to injury and announced that the company has decided the two services would have separate subscriptions, sites and brands. Again, no mention of why it is good for subscribers to have to sign up for and log into two separate services to find content they want to watch.

He concludes by thanking us for our patience (!) Where on earth did he get the idea that subscribers were patient about this problem?


Not surprisingly the criticism and frustration continue. And he’s still challenged with winning over both the subscribers and the public.

It didn’t have to be this way.

Read Part II of this post to see how it could have been different. Speaking for impact is not an  accident. It’s a skill.

Share your thoughts

What do you think of Mr. Hastings’ message? What would your message have been?

  1. Steve says:

    Netflix clearly doesn’t understand the market they arguably created and while he’s a smart guy who had a great idea, Hastings, it turns out, is not immune to founder’s syndrome. The “regular guy” bit failed because it changed nothing.

    How about, “We have decided to listen to our loyal customer base. Anyone who has been a consistent subscriber for more than 1 year (or whatever time makes sense) will pay what they have been. All subscribers, new or existing, can now choose how to receive Netflix provided content. This is effective immediately.”

    This stems further subscriber losses and offers a lower rate to existing subscribers who rarely used one service or the other and have wondered why they were paying for both. A grace period to let subscribers who left time to return without opening a new account wouldn’t hurt either. Better late than never.


  2. Never explained what is the difference; why it will be better–trust me!!??

    It si better for Netflix since they get more money if you stick with them.

  3. hello! i’m at the job atm so i didn’t have time to check out all of the article, however i do enjoy the things i read and i will read some more on your blog when i get back home.. Got a a bounch of stuff to complete at the job :) do you got an account at facebook? :) All the best.

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