Shannon: What Netflix can teach 'occupy' crowd

I wonder how many of the Occupy Wall Street squatters are actually enraged Netflix subscribers or retirees with Netflix stock in their 401(k)s?

The timing is about right.

In August, Netflix increased the fee for plans that include video streaming and DVDs by a shocking 60 percent. In September, the company an­nounced it was amputating the DVD side of the business and naming the new entity Qwikster. And in October, Netflix was planning to intro­duce beer commercials dur­ing streaming programming for everyone not subscribing to the new “premium plan.”

No wonder protesters are preparing to punish capitalists and any corporate employees above the level of “barista.” But participants in the March for Generalized Outrage are too late. The market has worked its magic and bulls bearing sell orders got there first.

Netflix stock was at $300/ share last July. After investors had more time to evaluate the inspiring leadership of CEO Reed Hastings, the stock price dropped to $111.62 in early October — a plunge of 60 percent in value.

Try to match that economic damage by dressing like zom­bies, eating donated food and hoping Congress will invite you to a hearing.

The first signs of a manage­ment woefully out of touch actually appeared months ago, way before the price increase Qwikster cwazyness. The tipoff was testimony before a House-Senate hear­ing on the elimination of Saturday mail delivery.

Netflix is the USPS’ largest customer, spending more than $600 million each year.

In my business, the largest customer has amazing clout, up to and including “is it OK if I use my tongue to shine your shoes?” Yet Netflix must believe the USPS is doing it a favor by taking its money.

In fact, Netflix sent a rep­resentative to the hearing to cheerlead for the post office, claiming that eliminating Saturday mail delivery would have little, if any, impact on subscribers.

I’m sure it won’t bother Hastings — a lackey delivers his DVDs before Reed leaves the office. But for custom­ers, eliminating Saturday delivery means no mailing a DVD back on Thursday and getting a new one in time for the weekend. Customers lose 17 percent of the delivery service with no correspond­ing decrease in price.

This sort of tone-deaf decision making is only pos­sible if you are an “industry thought leader” that reads too many of his own press clippings. Lucky for Netflix, government will bail it out, because elected officials are not going to give up Satur­day mail delivery as long as elections are held on the next Tuesday.

Netflix mistakes should be instructive for those con­fused about the free market, starting with the “Occupy” crowd. After the August price increase, I didn’t call Uncle Sam and demand govern­ment intervention. In Sep­tember, when the new billing rate began, I called Netflix to cancel the DVD portion of the plan.

Hastings is also evidently unaware of competition from Redbox (he really must do something about the tint level on the limo windows).

Redbox rents a new movie for only a buck a day, without a visit from the postman.

In fact, I would have to rent 17 movies a month to equal what my old Netflix plan cost. And I was not alone in this decision. More than 1 million other customers dropped at least a portion of their Netflix service in re­sponse to the price increase.

A big corporation offends customers. The media covers the controversy. Custom­ers punish the company by dropping its service and choosing an alternative product. Investors punish the mistake by selling the company’s stock. The com­pany learns from the mistake or it falls by the wayside.

Proof a free market offers options and competition, not government, is your best pro­tection in the marketplace. 

Shannon, a public relations and advertising consultant with corporate, government and political experience around the globe, can be reached at michael-shannon@comcast.net.