CEO Hastings: 'I Didn’t Get All Tense' Regarding Netflix Missteps22 Feb, 2012 By: Erik Gruenwedel
Netflix CEO Reed Hastings said the challenges he faced during last fall’s public relations gaffes involving a 60% price hike and poorly conceived spin-off of the company's trademark disc rental business paled in comparison to history’s leaders.
In a lengthy profile in the Feb. 22 issue of Vanity Fair, Hastings rehashes the infamous days and months last October when his decision to raise the price of Netflix’s popular hybrid disc and streaming plan from $9.99 monthly to $15.98, and the subsequent aborted launch of disc rental service Qwikster resulted in the company losing $12 billion in market capitalization as the stock value plummeted and there were calls for his firing.
Hastings said those days shook Netflix at its core but did not deter its resolve to deliver entertainment in the most cost-effective way to consumers. Indeed, the CEO eyes Netflix as a telecommunications company dealing with the challenges of transitioning from landlines to wireless.
But more than the price increase, it was the manner in which the increase and changes in the business were relayed to the public that irked subscribers, resulting in 800,000 canceling service at the end of the third quarter. The moves were seen by many as arrogant in the way they were subjectively portrayed by Netflix management as enhancing subscriber value. More than 13,000 protestors voiced concerns on HackingNetflix.com — an influential independent site for all things Netflix.
“We weren’t doing the price change to raise profits or something,” Hastings admitted to Vanity Fair. “We were doing it because we were so focused on becoming the streaming company and the global streaming company that we always wanted to be, and always have wanted to be.”
Since the debacle, hundreds of thousands of subs have returned as Netflix shares bounced back from $62 a share last November to $111 in midday (Feb. 22) trading.
Hastings said Netflix remains on course to spearhead the subscription video-on-demand market through first-mover expansion internationally and outspending would-be competitors. Throughout it all, the CEO said takes he views the past six months with perspective.
“When I look at the challenges that Gandhi had, or the various leaders through history, our challenges pale in comparison to this,” Hastings told Vanity Fair. “Over the last 10 years, I’ve read a ton about Winston Churchill and Abraham Lincoln. I’ve worked very hard, but my life’s always been fun. It’s not been the Civil War of 1862. That was dark, and how you hold things together at a time like that is completely different than what we experienced. When we had our stumble — in comparison to a health crisis — I slept well every night. I didn’t get all tense. Our issues were ones that were unfortunate business judgments, not of morality or ethics or scandal.”