It's sad when a great company acts shiftily, especially when it doesn't have to: The case of Netflix vs itself!

It's a lesson in how to not appear to be forth-coming.  

Last night--really early today, this Monday morning at about 2.30am--the Netflix people made what for them was a difficult announcement.  Initially and only on its own customer website Netflix announced that it's separating it's two core businesses into two separate companies.  On the one-hand the traditional DVDs-by-mail business which has historically made Netflix, well, Netflix--and successful--is going to be separated from a newer company to be formed, offering only streaming movie content.  The decision seems odds in some ways, but the choice to make a significant announcement in the dead of night in a limited media context seems very questionable.  Let me explain...

Let's announce the plan when everybody's asleep.

But that just the start of the story: If you're not following stock prices, the value to Netflix stock has steadly declined ever since that July announcement; it's declined about 50% as of today.  Consequently, it's reasonable to guess that the Netflix people were mindful of the public's likely reaction to the next decision--the break up of the company up into two parts, with customers soon to need two accounts [and two "bills" and two different sites to check and relate to] instead of one:  one for DVDs-by-mail and one for streaming video content.

So when the company decided to fly under the radar in dropping the next bit of bad news in the dead of night, it made a shaky proposition seem even more flawed!  You have to know that Netflix execs likely had to have misgivings themselves as to the real merit and soundness of the decision surrounding the new plan!  What they failed to see was this: that their manifest appearance of "guilty" behavior--guilty of proposing a plan that would appear to disregard strong and long-held customer loyalties--in effect "juiced" the perception of what will almost certainly be construed as a very bad plan on the part of customers and investors.  

Why does serving two markets mean having two companies?

Netflix claims that the changes are necessary because the DVD business and the streaming business serve two different markets--and maybe they do.  But that doesn't necessarily call for a once-formidable force in the business to break a part; heck, a great many firms serve very different, multiple markets just fine, indeed firms like GM, Ford, Chrysler, Honda, Microsoft, Apple, Dreamworks, General Mills--you get the idea, for the list could run on to be a very, very long list!  

[As an aside, early assessment is that this is Netflix's way to increase prices, not really serve it's markets better!]

I think that Netflix initially failed to "sell" what is not an obvious, favorable-to-all-parties decision in a very convincing, credible way.  Instead, it's approach underscored questions as to the merit of the decision itself; more immediately, it raises the hackles and jeopardizes the loyalty of customers and investors--the kind of people the firm can least likely take for granted right now!   

Much like a cheating friend or misbehaving child.

Corporate mistakes happen every day--that's simply a reality of business life.  What is so surprising is that so immensely savvy a firm could make such an ill-timed, awkward mistake; in effect, Netflix appears to be making explanations, the equivalent of hollow excuses offered by a cheating friend or spouse, or like the rationalizations in the principal's office of a wayward child, each to a skeptical listener.  

It all goes to show how business can--and in the current case of Netflix it does indeed--imitate ordinary life.  Very ordinary life!
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