The profit margins for Netflix dropped 25% this last quarter after the media giant announced that it was bisecting its services, and that it would be charging almost double in order for people to access both. Recently, Netflix also announced that it would be separating its DVD service out to a new company, focusing only on streaming.
Netflix’s price hike and announcement have caused almost a million people to cancel their subscriptions, with many millions more being angry about being denied services that they enjoyed. The decision seems to be a business savvy one by Netflix, as it can allow more emphasis on streaming. However, the backlash has severely damaged their profits this quarter.
When it all comes down to it, the backlash against Netflix is something that anyone who understands the culture of the Internet could see coming.
When it comes to business decisions versus the mindset of the consumer, the consumer will often react in certain ways that companies now need to plan for. The thing that most businesses still can’t grasp is that people, especially those that are able to unite on the Internet, will not always behave rationally or logically. They will do what they think will suit them best, even if it flies in the face of conventional business logic.
The same thing can be seen with piracy and microtransactions and boycotts and memes and everything else that has developed and is now part of the cultural mindset. Taking the time to get to understand the mindset of the Internet generation and knowing how to make smart business decision that make them happy is the best way to go.
Above all else, people do not like feeling like they are being ripped off, especially when prices are incredibly subjective and anyone with an Internet connection can find the material online anyway. If you want people to remain loyal to your service, you need to give them incentive to choose quality above all else.
Hiking prices, bisecting the services, and then separating the services may be a business savvy plan by Netflix. But Netlfix seems to have failed to take into account that by generating bad feelings and making people feel ripped off, they have made enemies. And as any company can attest, making enemies of internet savvy people is not a good idea. One cannot see the ripple effect fully yet. But we can be assured that the 800,000 people that dropped the service will have some bitter people included. Its just part of the trend.