A letter sent Sunday evening by Netflix’s CEO Reed Hastings begins with an apology, followed by an explanation of the future of Netflix. Or should I say, the future of Netflix and the beginning of Qwikster.
The current shape of Netflix and its future uncertainty is in fact a case study in what happens if companies only focus on the business of their business, and never develop the business of their brand.
In the letter, Hastings writes, “So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.”
The idea that the two services exist in a realm so separate from one another that they warrant two separate companies is only reinforced because Netflix has never told us what its brand represents and who as consumers we were when we chose Netflix.
The focus of Netflix has always focused to heavily on its process. Its business is streaming movies and sending DVDs by mail. But its brand could have represented, and could still represent, much more than that. The power of brand is that brand creates the deeper level by which products and services become connected. Netflix DVD and Netflix streaming did not work together because Netflix never told us the “why.”
Take Apple, for example, and its long-running “Think Different” campaign. It was not about a technology. It was about its brand. Apple even changed its name to Apple Inc from Apple Computers to avoid limiting itself by the the products it could sell. Why be limited in the products you can offer if brand permissions can allow for so much more? Netflix has never recognized this and it is why, if you ask someone what the brand of Netflix represents, the response is rarely more than “movies” or “DVDs.” If you represent “movies” or “DVDs” than you have diminished your value to the consumer to the likes of Vudu, Hulu, Amazon, Crackle, Redbox or any other distributor of “movies” and “DVDs”.
The recent split by Netflix is not the solution to the problem. In fact, if past performance dictates future results, all Netflix has accomplished is creating more market confusion and hurdles for preference with two companies lacking brand instead of one.
I always liked Netlfix, primarily for its streaming. But, like most first movers of a technology, if value is created simply because of that technology, then the value is lost when the competition arrives.
Again, I reference Apple and its iPad. Value for the iPad was built through the Apple brand. It is why tablet sales outside of the iPad have been failures in comparison and why if you buy a tablet you either buy an “iPad” or a “tablet”.
Hastings’s letter closes, “Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.”
The fastest way to gain that trust is talking about what is emotionally intensive to consumers. For anything Netflix says to be resonate, it means it has to be said by the brand itself.