One of the problems of constantly reading social media and tech news is that you often get stuck in one line of thought that traditional companies “just don’t get it”. In our eyes these multibillion-dollar companies are “doing it wrong” because they are jumping on a shiny new technology or using the internet the way we do. Sometimes the criticism is absolutely right but more times than not the instant reaction by these critics isn’t very well thought out. With so many people operating in the social media/technology echo chamber the idea that wasn’t very well thought out gets pushed pretty hard.
This last week I have read a lot of negative criticisms of Netflix (hardly a “traditional” company). Movie companies have been dealing with declining DVD sales and are trying to find ways to curb that. Their latest idea is to hold new releases from Netflix and Redbox for thirty days in order to goose sales. (If I think that is a sound strategy or not is a different debate.)
Redbox responded by filing a lawsuit. (Which makes sense considering their business model relies completely on new releases.) Netflix instead went to the bargaining table with the goal of reducing the price they pay for new releases. For Netflix 70% of their business comes from their back catalog, so this new release push back isn’t exactly going to hurt them. Reducing the cost of the new releases they acquire makes them more profitable.
I saw a lot of negative reactions to this. Most of the reaction was to the movie studios strategy but there were still a lot of people saying they would cancel their Netflix account if this happened. I don’t get the logic to that. A movie that you deemed unworthy of paying for in the theatre and that you have waited 4-6 months to see is now so important that you can’t wait another 30 days?
What I see is a company seeing an opportunity and taking advantage of it. I would love to see Netflix use the money they are saving to continue to develop their streaming capabilities. Today I got the disk to use my Playstation 3 to instantly watch movies. (This capability actually brought me back to using Netflix.) I’d rather have the instant gratification of being able to choose from an online library of movies instead of having the instant gratification of adding a “new movie” to my already lengthy queue.
I think that Netflix is a company that clearly “gets it” Netflix’s track record has been one of consistent innovation; this situation is an opportunity to allow for more. Personally I think we are quick to say that a company doesn’t understand the marketplace. Maybe it is just easier than giving them credit?
What do you think?