Netflix

Forty years ago, when Janet Yellen, chairwoman of the US Federal Reserve, was an economist at Harvard University, she was interested in the film Five Easy Pieces. She noted the scene in which a diner waitress refuses to bring Jack Nicholson’s character an omelette with coffee and wheat toast because it serves omelettes with cottage fries and rolls. “I know what it comes with, but it’s not what I want,” he retorts.

Andrew Hill

The digerati are having fun with the Securities and Exchange Commission’s ruling that US companies can use social media to distribute market-sensitive information such as earnings reports. “Facebook Flap Forces SEC Into 21st Century,” says Forbes.

Not so fast. The US regulator’s decision to drop its inquiry into Reed Hastings, Netflix’s chief executive, who boasted about new viewing figures on his personal Facebook page, is only an incremental advance into the new millennium. It makes sense for the SEC to acknowledge the growing use of social media (I’m guessing more people saw Mr Hastings’ Facebook post than have viewed any regulatory announcement in corporate history), but I don’t think the decision will prompt fearful CEOs to tweet their earnings much more than they do already – and, even if it does, it won’t make much difference to investors. 

John Gapper

This time last year, I wrote a New Year column with seven predictions for events that would occur in business in 2011. It is time for reckoning and I must say that I scored poorly, with only three out of seven correct.

To be fair to me, the predictions were deliberately provocative. As I noted at the time:  ”They are intended to be adventurous enough to be interesting – even if I turn out to be wrong, they should at least be things to watch.”

I was at least right about that. With no more excuses, let’s take a look at my predictions and what happened. 

John Gapper

It is a chastened Reed Hastings who has just decided to ditch his disastrous plan to split Netflix into two businesses – Netflix and “Qwikster” – and stick with what his customers liked in the first place.

Mr Hastings is right to back down – if nothing else, his bold experiment with “disruptive innovation” has mainly disrupted his own company. Its shares have not recovered since he raised prices and announced his plan to turn his DVD rental business into Qwikster while keeping the Netflix name for video streaming.

Unlike the long semi-apology he made last month when announcing the Qwikster gambit, which included a business school-style explanation of why he was separating the rapidly growing star from the cash cow, his missive today is short and to the point:

“It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs.

This means no change: one website, one account, one password … in other words, no Qwikster.”

That makes more sense than his assertion last month that:

“Another advantage of separate websites is simplicity for our members. Each website will be focused on just one thing (DVDs or streaming) and will be even easier to use.”

 

John Gapper

At first glance, the apology by Reed Hastings, chief executive of the US video service Netflix, for raising the base price of his video service by 60 per cent looks sincere and heartfelt – the kind of plain-speaking that is too rare in chief executives.

“I messed up. I owe everyone an explanation.”

So far, so good, but reading further into Mr Hastings’ missive, which follows a 15 per cent fall in Netflix shares last week as it said it expected to lose 1m subscribers as a result, it becomes clear that the apology does not mean he is backing down – in fact, he is going further.