Netflix turnaround shows power of listening

Netflix has rebuilt its reputation among customers and investors by listening to consumers and focusing on original content, communications leaders say.

Netflix has rebuilt its reputation among customers and investors by listening to consumers and focusing on original content, communications leaders say.

Netflix stocks surged this week after the company reported strong first-quarter growth, a turnaround from the plunging stock price and subscriber loss that resulted from its 2011 decision to raise prices and split into two units. The company called out the original series House of Cards, which debuted in February, for boosting its service.  

“Netflix did something fundamental: they listened to people,” says Jim Joseph, president for North America at Cohn & Wolfe.“They're really paying attention to what consumers are asking for, and they're giving it to them.”

Following an uncertain period that began with its 2011 restructuring, the company said Tuesday it added more than 2 million US streaming subscribers in the first quarter of this year. It also forecasted that it will reach between 29.4 million and 30.05 million US streaming users by the end of the second quarter. That number would surpass HBO's subscriber base of 28.7 million users, according to research firm SNL Kagan. Netflix also posted a profit of $3 million in the quarter, versus a loss of $5 million in the same period last year.

“We've focused on steadily improving the service, adding more TV series and movies that people love, and making it easier all the time to choose and watch wherever and however you want,” Netflix CCO Jonathan Friedland tells PRWeek.

That approach of paying attention to consumers has helped the company regain stakeholders' trust, PR executives say. For example, Netflix decided to release episodes of its original series, including House of Cards and the new season of Arrested Development that will begin in May, at once rather than in installments, responding to customers' desire to watch TV in “marathon sessions,” Joseph says.

“We've really walked away almost completely from appointment TV, and Netflix has listened and responded accordingly,” he says. “They've learned a lesson that you can't just make an abrupt decision without knowing what customers want.”

Netflix rustled feathers in 2011 when it announced it would increase subscription prices by 60%. A few months later, CEO Reed Hastings said in a mass email to users that the company would split its streaming and by-mail DVD services, with the latter separated into a spin-off business called Qwikster. Netflix scrapped the Qwikster plan, and Hastings apologized for how the company communicated the changes.

Since then, Netflix has aligned its communications with its business strategy by making content central to the company's story, says Maggie O'Neill, partner and senior director at Peppercomm.

“From a PR and marketing standpoint, everyone is talking about the power of content, and Netflix is showing here that it really is powerful and people will come back for it,” she says. “Now that the content story is catching up, people are looking back and saying it makes so much more sense now. They're willing to forgive and forget.”

On the investor side, Hastings helped “position the company for the future” by focusing on its streaming service and defending his strategy, O'Neill adds.

“He put their money where their mouth is, and that's how you have to rebuild trust,” she says.

However, PR leaders caution that Netflix must learn from past mistakes to continue to compete with entertainment giants like Amazon, HBO, and Showtime.

 “[Netflix] hadn't listened to their customer base the way they should have or done the market research they needed to, but they have been pretty communicative since,” says Rich Tauberman, EVP of corporate communications at MWW. “They have to continue to be proactive in their communications, and when they are considering new things be circumspect in how they announce it. They're hot now, and they have an opportunity to play off that.”

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