Monday, March 22, 2010

You lose, Netflix

Netflix knows I am not going to leave them.  but I am going to talk bad about them over lunch and refer to it as "your father" when talking to the children.  I am going to withhold my love.  And like many other voluntary movie reviews, I am not going to give it free content.

Here's what happened.

In 2004 --  not long after I opened my membership -- Netflix went all "social network" before we had invented the word by creating the Friends list. This was my toe-in-the-water of internetworking, and being a product designer myself, I enjoyed looking for the angles in this feature. What was in it for them, I wondered, to introduce such a cross-account look-up drain on its own system. If you were there in those days, you may remember they pushed it hard, even encouraging us on the from page to invite our friends to join Netflix.

That made sense of course.  More referrals, more customers.  Refer a friend.  I get it.
When selecting a movie, you could write a little review about it, called a Movie Note, and share it with someone in your circle.  You could see how they had rated the film, and notes they had written about it.  I decided this served their distribution system, by helping to keep discs in a given region for a longer period of time to speed their turnover and build large local libraries. I made this explanation up, but it sounded like the kind of theory I would pose in a business case of my own.

Movie notes and movie sharing did have an influence on film popularity , most famously by pushing Crash to the top of the Netflix 100 within weeks of its DVD release, though the film grossed only $53M   in theatres and was the least-grossing Best Picture winner until The Hurt Locker.   Even today,   it sits atop #1 on the Netflix 100.    I also believe that Friends sharing and movie notes helped feed the algorithm that determined what "people like me" like and  what they also rent.  On the new movie details page, of course, those suggestions are no longer offered.

I don't doubt that Netflix's business model is a strain.  They are the largest customer of the US Postal service and are now considering pausing Saturday deliveries.  They are working hard on more ways to stream films so they don't have to deliver at all, and perhaps that is the wave of the future.  The point I am trying to make is that they sold themselves hard, then throttled back when we bought into it.
Netflix members are a vocal lot, and resent most being told that only 2% of them use this or that feature, so it is being discontinued.   The Company backed down on getting rid of multiple queues after a public uproar, but seem committed to the new details page and have stated that the Friends features are being eliminated.  I can't confirm what their success measures were for the Friends design when it was launched, but it must have been more than 2%, no matter how large a number that grew to be. (200,000 estimate)

Turns out they are not a Passion Brand after all.  Too bad, because they are in Passion Member territory.
And they may lose 1% of the 2% they no longer want to spend resources on.  Maybe customer retention is no longer a goal.

* Friends and Profiles shareholder excerpts from Netflix 2004 Annual Report

1 comment:

  1. Thank you for this well written commentary about the Netflix decision to axe the "Friends" feature. I joined Netflix in part because of this feature. I just don't buy their explanation that only 2% of users employ it (how do they know what I look at when I go to a film's page? I look at how many stars my friends give it!)


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