In a NY Times article, Netflix’s Reed Hastings, was named among 2011’s worst CEO’s. Hastings was demonized for raising prices and trying to break his company into two separate entities, one that would focus on its existing mail delivery DVDs and a second that would focus on its streaming services. Personally, I don’t believe that Hastings deserves to be on such a list; quite the opposite.
Many protested Netflix’s price increase. I am a Netflix user and my rate went up by a whopping $4.00. Some might argue that it’s not the total dollar amount, but the idea of a 20% increase. I must admit 20% sounds high, but these extra costs came to reconcile for streaming services Netflix had been providing at no additional charge. Netflix streaming services were an instant hit in my house, so much so that my living room TV is now dubbed the Netflix TV. I even returned the cable box since it wasn’t being used any more. I saw the value of this service instantly and knew it was just a matter of time before Netflix raised its prices. It was too good to be true. After all, all that content is not free. Admittedly, raising the prices slowly would have allowed Netflix to benefit from creeping normalcy when actions inflicted in slow, small steps go on almost unnoticeably. A strategic misstep on Reed Hastings’ part perhaps, yet not enough to be one of worst CEOs of the year.
The division of his company is another complaint. Netflix success blossomed from the demise of the once mighty Blockbuster. It figured out a way to eliminate late fees and still make a profit. Netflix changed the way people got their movies, and influenced the way they were watched. After years of growth it’s now an institution that just like Blockbuster before it runs the danger of eventually becoming irrelevant. Reed Hastings is working hard to ensure that Netflix remains atop its perch. His actions are straight out of The Innovator’s Dilemma (by Clayton M. Christensen) which states that well-managed companies can only survive in the long-term by developing disruptive technologies, technologies that might take them away from the practices that made them industry leaders in the first place.
Real Thoughts 