Netflix is held up as the king of alternative entertainment viewing for those who are not satisfied watching cable or satellite programming on their television sets.
They revolutionized the DVD rental business and dunked Blockbuster, Hollywood Video and the rest until they could no longer hold their breath. Netflix was the first service to strike deals with all three video game consoles, with some Blu-ray players sporting a "Netflix" button on their remote controllers. They have more than 25 million streaming accounts, with users consuming more than a billion hours of Netflix content a month.
They also appear to be pretty good at messing up a good thing.
First, they slapped their best customers in the face with a throttling fiasco in 2006 when it sent frequent renters to back of the line. Then paying customers got slapped in the face again when in September 2011 Netflix arrogantly announced that their DVD-in-the-mail business which had made Netflix a success was now a dinosaur, and penalized customers for wanting DVD’s and a streaming account. Netflix lost 800,000 subscribers in the three months following the debacle.
Netflix CEO Reed Hastings and CFO David Wells explained the loss to investors this way: “Our primary issue is many of our long-term members felt shocked by the pricing changes, and more of them have expressed that by canceling Netflix than we expected.”
It was a clear and epic failure on the part of Netflix corporate strategy.
And now, Netflix has decided to stop streaming newer releases of movies and television programming. Instead, it wants to stick to offering its growing library of second-run movies and TV reruns.
The decision is based on Netflix’ inability/unwillingness to negotiate pricing with movie studios and television distributors to release first run movies and shows. Netflix has been falling behind cable on-demand offerings, as well as Redbox and Amazon.
With studios holding back on newer content, and demanding that they would only make it available if Netflix introduces a tiered pricing strategy so they're not belittling the value of their hotter titles, Netflix said no thanks, while cable, Amazon and Redbox are playing ball with Hollywood.
Netflix argues that it doesn't want to follow its competition into the first-run movie pricing game, even though bestseller lists show that it's what customers crave the most. Addditionaly, Netflix is also entering the competitive original programming space with an HBO-like model in 2013 when it produces and distributes "House of Cards" starring Kevin Spacey.
Playing hardball on content deals with the studios and networks appears to be another arrogant move by Netflix. It seems that instead of being king of digital content, they may turn into Nick-at-Nite.
Who will step up and provide consumers what they are looking for? On-demand, first-run content, viewable on the device of their choice?