Localspeak

The Thin Line Between Love & Hate: Netflix Brand Equity

14 September 2011

As Netflix announced earlier this year, its price hike in service took effect September 1st.

After contract negotiations collapsed between Netflix and Starz-a significant source of premium streaming movie selections- on September 2nd the cable network announced it would be pulling its content from the service in February 2012.

And when Netflix customers tried streaming two movies simultaneously on September 8th, they encountered an error message indicating they “should stop playing at least one movie and try again later.”

How have these three events impacted Netflix brand equity?

What can online social media tell us about Netflix customers?

Do these social media soundings suggest the need for damage control?

This summer, Netflix social share of buzz for movie selection and cord-cutting doubled, while share of cost buzz skyrocketed 14-fold, as seen in the chart below.

Netflix Share of Buzz by Topic vs. Prior Quarter

Earlier this year with the perceived threat that Netflix might precipitate “cord cutting,” it seemed cable companies were hoisting the red flag. In a seeming reversal of fate, today it seems Netflix is doing so. The Netbase Scorecard we’ve tracked since June shows a continuing shift in online customer sentiment, with a growing vocal proclivity toward jettisoning the service. A strong sense of betrayal of customer loyalty also is apparent among some early adopters who saw the brand as having an equalizing effect on high monolithic cable rates.

In July Netflix deployed streaming in Canada, and this week it launched its service throughout Latin America and the Caribbean. One would assume that this global expansion springs from a solid domestic foundation. However, during the past 12 months, our social media tracking shows the trend line in brand net sentiment has been zigzagging, yet with few exceptions (e.g. its July 11th price hike announcement) still remains in positive territory. Significantly, although not precipitous, Netflix net sentiment has continued to decline during this past year, eroding brand equity.

Analyzing the top 10 subscriber behaviors-negative and positive-since June with Netbase Workbench , we found it striking that while the Positive Behavior chart subs shows only a minute 2% explicitly saying they will “stick with” Netflix, a larger 26% of subs say they “will cancel” the service. In total, the top 10 Negative Behaviors show 46% intend to “cancel,” “stop,” “drop,” or “get rid of” the service.

Even with small percentages of subs stating they “need,” “want,” “recommend,” “buy,” “find,” “try,” and “choose” Netflix, these behaviors only amount to 16% of all Positive Behavior sound bites analyzed. A look under the hood at customer online conversation trends reflects dissonance among brand loyalists, signaling a looming threat of defection as the chart below shows.

Netflix Top 10 Negative Behaviors – June-September

Netflix Top 10 Positive Behaviors – June-September

Negative Emotions

The higher Netflix rates have prompted subs to seek alternatives and their ire has piqued with the recent enforcement of streaming limitations.

I just cancelled my Netflix service since they raised the prices. Blockbuster Express keeps sending me these free rental codes so we’ll just do that for awhile and watch the 8 zillion movies for free on DirecTV. I do like Netflix but we can do without it for awhile. Source

I canceled Netflix DVD service as a result of the price increase. If Netflix will enforce a one stream per account limit, I’ll be searching for an alternative much more aggressively. Netflix can’t keep increasing costs for consumers without relent. Source

Rage against the social media machine

Not only are Netflix’s disgruntled customers continuing to inflict damage on Netflix’s brand across social media, but they have even sought to take the discussion offline on their own terms, telephoning individual Netflix executives and leaving them irate voicemails. This is not even Netflix’s most recent social media snafu. On June 13, Netflix Instant Play suffered an overnight outage. As users took to Twitter to vent their frustration, improved Twitter attention from Netflix. Source

Honestly, I’m surprised that Netflix was able to use their online streaming business model for so long at such a low price. I have a feeling that Netflix didn’t raise the price of everything because they’re greedy (they’ve probably figured out some sort of formula to determine roughly how many people would leave for every $0.01 the price goes up), but because the studios that own the rights to the movies and tv shows are realizing that Netflix is running a good operation that brings in a lot of customers. f**kNetflix. I am officially pissed. I bought the whole argument that the price increases were due to pressure from studios, that ultimately it would result in more content being available for instant streaming. Source

Useless netflix. first increase the prices and now they aren’t available. great, really really great… Source

First, price hikes. Now, 1000 less movies. Netflix is going downhill. Source

Netflix is greedy. Every time I get comfortable with a plan and adjust my finances accordingly (it’s a big deal, I’m poor), Netflix jacks up the price again. I’m bailing on them. Source

Positive Emotions

Many of the positive posts came from people who like the many titles available and the inventory of streaming content.

I like Netflix streaming. No commercials and I can watch exactly the episodes/movies I want, when I want. (Well, if they’re available, anyway.) Source

Just got #AppleTV, nice to be able to stream everything to the TV/sound system. Why won’t HBOGO stream though?! Netflix app is nice. Source

Netflix App also culled positive attention but there also are critics who dismiss this attribute.

I can’t believe that I just watched an entire movie on my cell phone. #THEGOODS is sooooo hilarious! Love the #Netflix app. Source

I hate the Netflix app. It’s the most bugged out app I’ve ever thought of using. Source

To be sure, Netflix does have quite a few diehard movie and TV watchers.

I like to keep Netflix guessing. Today’s line-up: Mad Men, Hoarders, and Spiderman. Just when they thought they figured me out… Source

Even some loyalists complain about the site interface.

Love the convenience of Netflix. Hate the site interface. Always seem to have trouble finding movies to see. Source

Returning to the initial questions we posed, our social research findings show:

*There exists an erosion of Netflix brand equity: The brand’s ill-timed series of this summer’s events – price hike announcement, collapse of the Starz deal, and enforcement of streaming limitations-have prompted declining net sentiment, brand passion, and falling stock share.

*Netflix customers convey a strong sense of betrayal, and they have begun to act on their ire by posting vociferously and frequently, stating their intension to bolt and switch to other streaming services, or cancelling their subscriptions altogether. Once the darling of a vast loyal cadre with a high degree of brand engagement, even ownership-early adapters claim responsibility for the brand’s growth- loyalists are breaking rank, reflecting a sense of treason.

*Damage control at this juncture wouldn’t be such a bad idea for Netflix. As it boldly launches its Latin America service this week, the coincidence of corporate snafus create a perception that, while the numbers crunchers anticipated some US defection, the brand most likely calculated its loss would be offset by overall rate hike acceptance and global expansion-not to mention the fast one they pulled as a streaming enforcer.

What price brand loyalty?

Dear Netflix,

Why have you jilted me?

I have been a loyal subscriber since day one, contributing to your brand equity and competitive edge while you jousted your way through a phalanx of established media. I’ve been deeply engaged with you and feel your sweat equity as mine.

Maybe we could attempt to rekindle our love and try courting each other on new terms. What would you say to offering your early adopters a tiered preferential rate to show just how much you value our partnering in your success?

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