A reputation recoverer as year ends
When 2013 closes out next week, Netflix might possibly be the best performing stock in the S&P 500. Its stock has climbed about 310 percent! This is the same company that was going to raise prices by 60% and spin off its DVD mail order business in 2011 from its streaming business. Remember Qwikster? Netflix’s stock dropped precipitously at the time and the company was satirized on SNL. At the time, Hastings said “I realized, if our business is about making people happy, which it is, then I had made a mistake. The hardest part was my own sense of guilt. I love the company. I worked really hard to make it successful, and I screwed up. The public shame didn’t bother me. It was the private shame of having made a big mistake and hurt people’s real love for Netflix that felt awful.” Private shame is worse than public shame, I agree there.
In an article by James Stewart of The New York Times, Hastings said last spring that the damage to Netflix had been self-inflicted and he’d describe the beginning of their recovery journey as “a partially healed bone.” That was a good analogy because a partially healed bone is sensitive, fragile and in need of attention and nurturing. It needs time to mend. A partially healed bone leaves you a bit unsteady and overly cautious. This must have been how Hastings felt.
However, reputation recovery does happen. Not to all but to some who focus on their customers and I think that is what Netflix did to recover from its tumultuous, high-profile reputation downturn. It created new partnerships and developed stupendous original programming (House of Cards and Orange is the New Black). Reed Hastings kept his job (usually the CEO takes the hit) and was just voted best CEO of the year by Motley Fool.
Recovery did not happen overnight but two years later, the company has rebounded and is earning accolades, positive media and a boatload of new subscribers. Bravo.