When Netflix' CEO issued an apology to customers, to whom and for what was he apologizing? Was he apologizing for the 60% increase in prices for DVD customers? Or was he apologizing for abandoning those customers, the customers that built the business, for the sexier streaming business that will now represent the Netflix brand? “I messed up. In hindsight, I slid into arrogance based upon past success,” doesn’t explain it. But it did serve to fan the flames of social media, and now Netflix (total) is under a reputation attack.
If raising prices to improve margins moved the reputation needle, few would do it. It all relates to execution and modeling. It’s form over substance. There was no apology for not being able to renew the Starz movies license, for not having a competitive representation of current offerings, and for the sudden creation of two separate companies. The DVD company is now labeled “Quickster,” a curious choice that opened another proverbial can of worms, as there is already an active “Quickster” Twitter account, and Netflix hasn’t filed a trademark application (by late last week).
Does reputation matter to valuation? Netflix investors registered their sentiments in the marketplace, administering a massive $6B haircut. The proliferation of reputation risks, left unchecked and unmonitored can produce adverse effects that cascade throughout an enterprise. IP and risk managers need to understand the dynamics of reputation, and need to inform the "C" suite. On October 13, Dr. Nir Kossovsky will detail and explain the components of reputation for all stakeholders to both advance the business case for reputation management and to help analysts discover reputation-related weaknesses in an organization’s IP management plans.