Netflix: Slow Subscriber Growth Due to Things Netflix Cannot Control

October 15, 2015

I like the idea of blaming what some MBA whiz called exogenous events. The idea is that hapless, yet otherwise capable senior managers, are unable to deal with the ups and downs of running a business. In short, an exogenous event is a variation on “it’s not my fault,” “there’s little I can do,” and “let’s just muddle forward.” The problem is that hunting for scapegoats is not a way to generate revenue. Wait. One can raise subscription fees.

I read “Netflix Is Blaming Slow US Growth on the Switch to Chip-Based Credit Cards.” The write up references a letter, allegedly written by the Netflix top dog. I noted this passage:

In his letter to investors, Netflix CEO Reed Hastings partially blamed America’s recent switch to chip-enabled credit cards. As credit card companies send new cards to their customers, some have been issuing new numbers, as well. And if people forget to update their credit card number with Netflix, they can’t pay their bill and become what Hastings called “involuntary churn.”

I like that involuntary churn. I remember working on a project for a telecommunications company in which churn was a burr under the saddle of some executives. Those pesky customers. Darn it.

The write up ignores the responsibility of management to deal with exogenous events. When a search system fails, is it the responsibility of customers to fix the system. Nah, users just go to a service that seems to work.

I interpreted this alleged explanation and the article’s willingness to allow Netflix’s management to say, in effect, “Hey, this is not something I can do anything about.” If not the top dog, who takes responsibility? Perhaps the reason is not chip enabled credit cards? Perhaps users are sending Netflix a signal about sometimes unfindable content, clunky search, and a lack of features. Not everyone is a binge watcher. Some folks look for Jack Benny films or other entertainment delights. When these are not available, perhaps some look elsewhere. See and you shall find often delivers the goods.

Stephen E Arnold, October 15, 2015


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