It’s hard not to be oddly fascinated by the news today that Netflix is tabling its confusing plan to segregate services, after an unpopular rate hike. (See below for the full story.) What’s all the more frustrating and confusing by their decision is the fact that their business plan and quality of operation is still sound, but their marketing team is just flip-flopping so much that customers are throwing up their hands and walking away.
In the fickle landscape of the entertainment industry, this is a common story. Many good ideas or technologies have been torpedoed by piss-poor marketing strategies that have ultimately caused the death of several companies, and slaughtered the market share of several more. Here are five such instances.
While Netflix’s rash decision to divorce its two services in the wake of outrage over its price hike made little sense to customers and tech experts alike, the real blunder here was made apparent by its reversal of the announcement today, stating that both DVD’s-by-mail and streaming will be kept under the Netflix banner and not separated into the Qwikster and Netflix websites, respectively.
While Netflix’s action so soon after the price hike was obviously a red flag, people were left wondering what the point of making it more difficult to subscribe to both services was. It seemed to be a knee-jerk reaction with little thought for logistics or the customer experience. The announcement today that from CEO Reed Hastings that the company had “underestimated” the desire for the current way of doing things reinforced the notion that the company doesn’t understand its marketplace or operations (best-case scenario) or just doesn’t care about its customers (worst-case). With Netflix customers fleeing left and right, the move has sent its stock price plummeting and has opened the door for competition in a niche that Netflix had a stranglehold on as recently as a year ago.
While HD-DVD did everything they could, Sony proved to be too big a foe in the format war for the next generation of video discs. Sony, having learned its lesson from the Betamax debacle (see below), licensed the hell out of its Blu-Ray technology, proving that the Sony name can trump a similar technology that even had a head start to the marketplace.
While the race was neck-and-neck in its infancy (I held out on committing for almost a year, then just lost interest and still haven’t upgraded), millions of Americans were Blu-Ray customers whether they wanted to be or not since the technology was included in the highly coveted Playstation 3 gaming console. Perhaps this isn’t so much and HD-DVD failure as a Sony marketing success, but let’s not get semantic. Sony won the war because HD-DVD couldn’t step up.
While the second incarnation of Sony’s Playstation gaming console was a financial success in every sense, Sony managed to alienate its fan base with the product’s ubiquitous “disc read errors,” that rendered it useless well before its time. But people kept buying and rebuying because PS2 was the only game in town for a long while. Adding insult to injury was the fact that Sony simply didn’t address the problems that its customer complained of.
But once Microsoft busted out its Xbox console, consumers realized that they weren’t beholden to the tech giant and many jumped ship. Though Microsoft had similar problems with its “ring of death,” the damage had been done, and Sony had lost a fair amount of its market share. The whole phenomenon evidenced that a company can recover from a faulty product, but recovering from treating your customers poorly is a much taller order.
Rightly or wrongly, people had a huge problem with Blockbuster’s late fees. It was easy enough to rent a movie, but getting it back on time was always the x-factor. It’s proven to also one of the biggest issues with the late-fee free Netflix, and in those instances, customers only need to find their way to a mailbox.
With Netflix beginning to capture some of the video rental market share in the mid 2000’s, Blockbuster wanted to compete with Netflix’ late-fee free existence, so they introduced “the end of late fees,” and promoted the hell out of the concept. However, people didn’t see the value in Blockbuster replacing one simple fee for a more complicated system that still penalized you for not returning your video on time.
Here’s what Blockbuster did. Screaming “the end of late fees” from the rooftop, they “ended late fees,” by charging customers for the purchase price of the video if they didn’t return it within six days. Should they return it after that, the purchase price would be refunded, minus a $1.25 “restocking fee.” Fun!
However, if you didn’t return the video within 30 days (a tall order for a pot-smoking college kid such as myself), you were not able to get a refund, and you were the proud new owner of The Love Guru or some other piece of crap that you didn’t even get around to watching.
Blockbuster got sued by several states’ attorneys general and ended up having to change their entire business plan. No one can tell you what their rental structure is now because everyone is using Netflix or Redbox to get their DVD’s, and Blockbuster is dying a slow death that the masses delight in. The good news is that they finally did end late fees by going out of business.
Why did a video format that was far superior to VHS become a running joke throughout the 80’s, a decade that was pretty hard to take seriously in the first place? Marketing, plain and simple. Sony introduced Beta at roughly the same time in the mid-70’s that JVC released VHS, but that was the beginning of the end, as Beta was marketed as an upscale alternative that was prohibitively expensive. By the time prices on Beta had fallen to match those of VHS, VHS already had 70% of the market share, putting Beta way behind the eight ball.
However, Sony’s biggest mistake was holding on to the Beta format for only Sony machines, whereas JVC licensed the hell out of its VHS technology so that VCR’s were being sold by most every electronics manufacturer. Had Sony gotten Beta out through more avenues, perhaps we’d be trying to dump Beta tapes in 2011 for pennies on the dollar, rather than VHS.