Netflix Isn’t NY Times, Apple, or In-N-Out

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The Price Isn’t Right: What New York Times, Apple and In-N-Out Could Teach Netflix

In this recent Forbes article, Netflix gets called out for not understanding pricing in the marketplace. But the argument falls flat (at best) and makes some pretty wacky assumptions (at its worst).

A little while ago, I wrote a post that stated that Netflix’s moves were anchored in a “startup” mentality – and I’m still sticking by that piece. For the Forbes article, author Trish Gorman starts off her piece with a rather ominous declaration:

What happened was more than a minor public-relations snafu. Netflix stumbled in its pricing—a minefield for any business and the last place you want to make a misstep.

So the premise is that Netflix has committed a cardinal business sin – the “last place” they can make a mistake. But like I argued in my previous piece, this really isn’t a pricing issue. Fundamentally, Netflix restored it’s original business – at a 20% discount (from $10 / month to $8 / month) of DVD-by-mail. They’re simply splitting their operations because the two businesses are different businesses that serve the same need. But that’s not what I want to focus on (just yet).

The Forbes article tells us that Netflix should learn from New York Times, Apple, and In-N-Out. 3 iconic brands, to be certain, with rabid fans and outwardly-successful business models that Netflix could use a case-study in pricing minefield avoidance. So what’s the takeaway? Uhm…

Her first example of how the New York Times has succeeded concludes with:

…the Times earned $83 million in the second quarter of this year, down from $93 million in the second quarter of 2010. But that the company managed the enormous price hike with just a few murmurs of complaint from its readers was extraordinary.

The only thing obvious from this example is that the NY Times is losing money. Hooray for their savvy pricing decision! Ultimately, the NY Times suffers much like Netflix: Premium content is blended in with commodity content, driving the price down to some sort of mean value that is averaged across the whole array. Would I need to read the New York Times for coverage of a national news story? Of course not – they’re likely getting their information from the same wire service that AP, Reuters, and every other news outlet is using. And in the case of the East Coast earthquake this past summer, I was getting news on the quake from people I follow on Twitter about 5 minutes before the Washington Post website. Continue reading Netflix Isn’t NY Times, Apple, or In-N-Out

Netflix Moves Like a Startup

Update 10/10/2011: Ahh the joys of watching business do what it does best in today’s age: Change. Turns out that Netflix actually does give at least half a damn about it’s existing customers, and at least nixed the idea of spinning off the shiny plastic disc business that would’ve been Qwickster.

From Ars Technica:

The change seemed needlessly drastic and complicated for many users, forcing customers to be billed twice and to search for DVD and streaming content on separate websites. But now, Netflix customers will never have to hear the word Qwikster again.

For anyone who took a marketing or branding course in college, I think Qwickster will be a nice sidebar on the chapter that mentions the folly of New Coke. I admire Netflix’ gutsy move to try to shed & alter their core business, but obviously they were too severe in their actions. Internally, I’m sure there’s still a deep divide within Netflix between the DVD logistics folks & the streaming service folks, but for now NFLX customers can relax a little bit… and get back to venting frustrations over the price hike.

… and here’s the original post … 

I’m in the middle of reading Do More Faster – a book of short essays by the folks involved in the TechStars group – and I’m taking to heart lots of the worthwhile tidbits of startup advice. Especially on the verge of launching our new startup – Dashter – I want to make sure we’re building more than just a “startup” – we’re building a full-fledged scalable in-demand business. More on that later.

What caught my eye this week is Netflix, and how they’re acting so nimbly right now it’s like an awesome case study in watching a startup turn in to a big business only to remember it’s a startup again.

I just recently became a Netflix customer (streaming only) having come from Blockbuster’s DVD-by-mail program. But with the addition of a couple AppleTV’s in my house, streaming on-demand service was a no-brainer. So when I see an article like, “Who Stole Netflix’ Mojo?” on c|net (in addition to mountains of mainstream coverage from Yahoo! News to KNX1070 news radio mentions), my consumer-brain goes, “Oh no – did I buy a bad product?” Then my startup-brain fires back: “Go Netflix, Go! :)”

Continue reading Netflix Moves Like a Startup