Netflix wanted two companies, one without a brand, the other with the top brand in the industry. The one without the brand they wanted to run the business long associated with and built up by the established brand … only with a 60% price hike. The top brand they wanted associated with the newer, presumably more profitable streaming business, with no price increases. The new company, with the old business model, would be named Qwikster (rhymes with trickster), a name trademarked by someone else. The new company with the new business model would carry on as Netflix.
Customers voted: one million Netflix subscribers fled; the stock price dove; the CEO issued an apology.
Netflix today announced a reversal: no Quickster, no two companies, no separate Web site … but customers are still going to have to pay more. If there were ever evidence why executives have a responsibility to guard and foster an organization’s reputation, here it is. The bungling tarnished the brand, but as we have seen in the past, decisive corrections can expedite restoration quite rapidly. On Thursday, BVR will host Dr. Nir Kossovsky in a webinar on reputation risk, and how the proliferation of reputation risks, left unchecked and unmonitored, can produce Netflix-type effects that can cascade throughout an enterprise, its value-supply chain, and stakeholders, and erode enterprise value significantly.