Qwikster Flops Due to Social Media Mishap:Can Netflix Recover?

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In previous posts I have discussed companies that have really put social media to work for them, however social media can be devastating to a company if not used effectively; just ask Netflix.

In 2011 Netflix was set to launch a new service called Qwikster, which would have offered a DVD only service to it’s customers. On October 10,2011 Netflix announced that they would not be going ahead with it’s separate entity in Qwikster only three weeks after it had announced it’s plans to create it. What changed the companies mind so suddenly you ask? Three words: Social Media Mishap

Netflix advertised a Twitter account for @Qwikster before they quickly realized that user name already existed in the Twitter database. Not only did it exist, but also it belonged to a user not associated with Netflix that talked about drugs and cursed a lot. Even though he was not associated with Twitter the damage was already done and Netflix bad reputation had been created and poor judgment would be associated with the brand.

Additions to this Disastrous Recipe

Although the social media mishap was bad, and caused an enormous amount of negative media and opinion of the company, it had an equal counterpart in the downfall of Qwikster. Netflix got to greedy within their success and tried to separate their DVD by Mail package and their online streaming package. Although risk is associated in every setting, including the risk of failure,  a company of this size should have conducted the research and gotten to know it’s customers better, so that they would have known Qwikster was a terrible idea and would not garner support amongst their customers. The customers did not want to pay and have their existing services separated. Although they canceled the separation of services, Netflix still intends to keep its price increase.

Consequences of Their Actions

After Netflix announced their Qwikster plan, their stock price dropped 25% from $155 to $117. After announcing the 60% price increase earlier in the same year, their stock dropped from $300. On website cited “ The cost of this particular blunder was 800,000 lost subscribers, or $192 million in $20/month subscriber fees.”

Whenever a company introduces a new product or innovation there is always some sort of risk involved. How with this affect our existing product sales and customer opinions will our customers be open to the new product will be competitive in our market? Unfortunately for Netflix their marketing team, social media team, and risk management team failed causing them to lose many customers, company value, and money while gaining negative publicity and poor brand recognition.

I think that since Netflix offers a convenient product, and therefore it’s customers will move on from this social media disaster. In the future I feel as though Netflix will be it’s own biggest enemy.

Are you a Netflix customer? If so, did you continue your service when the price increased? Do you feel like Netflix can bounce back from this social media mishap?

Smith, S. (2012, January 20). What the Biggest Social Media Blunders Have Taught Us. Ragan.com. Retrieved February 26, 2012 from http://www.ragan.com/Main/Articles/What_the_biggest_social_media_blunders_have_taught_44253.aspx

Kafka, P. (2011, October 10). Qwisktter is Gonester: Netflix kills it’s dvd only business before launch. All things D. Retrieved February 26, 2012 from http://allthingsd.com/20111010/qwikster-is-gonester-netflix-kills-its-dvd-only-business-before-launch/

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2 responses »

  1. Great post! My parents used to be a Netfilx subscriber, but after the price increase, they simply felt it wasn’t worth it anymore. Instead they are using Redbox, which I feel is becoming more popular than Netflix now. I think that although Netflix is doing poorly right now, they will probably bounce back with new features or something like that. In fact, it looks like they’re trying to incorporate Facebook with it: http://www.fastcompany.com/1799359/dont-let-congress-kill-netflix-facebook-integration.

    You bring up a good point about research. It seems as if Netflix did get too anxious about this new feature and didn’t do their background research.

  2. When Netflix announced the price increase, I took a hard look at my entertainment budget. I actually ended up cancelling cable as Netflix and Hulu Plus where a much better value and I was looking to cut costs drastically. Netflix was driving this change by a dual need to manage increasing mailing costs and also increases in streaming costs (http://news.yahoo.com/behind-increase-why-netflix-raising-prices-094058403.html). I also had heard that Netflix did not want to pay streaming rights for people who simply wanted the DVD option.

    Just imagine if Netflix had engaged customers via Social Media to discuss what needed to change. Netflix would say that we need to change the current streaming and DVD options to address increasing postage and digital rights expenses. Netflix could then have generated options for how customers would want to see services offered. This would help understand market percpetion on the services themselves and also get a gauge on if the Qwikster spin off was really needed.

    One other note on Qwikster. This would have potentially cost Netflix more in the near term. With the combined queue I see when DVDs become available on Instant. When I see this, I watch them over streaming and do not have the DVD mailed. This gives me a better experience while saving Netflix money!

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