Sunday, November 13, 2011

Influential Leaders


Question: Who have been some influential leaders (Founders, CEOs) in the industry over the past 20 years?

Summary: This article discusses the choices of Reed Hastings, the CEO and cofounder of Netflix, in the past and recent events. The sock price of Netflix has fallen by 70% since July, at least partly due to his poor decisions about the direction of the company - the price increases and an attempted split of the two services that the company offers. However, investors and analysts have long praised his strategic thinking - even if the recent results have not been the best.

Hastings has a reputation for "trying to mold his company to the future, not the past." However, the recent attempt has cost his company 800,000 subscribers. The article presents the idea that Netflix's biggest problem is that it's streaming service offers a wide selection of bad movies, but not many good ones. For a long time there was the impression that the wide variety of movies that are available by mail from Netflix, would soon become available for streaming. Lately, it has been made clear that this is not the case. The content is simply too expensive for Netflix to be able to provide at the prices that consumers are willing to pay.

The article makes the point that Netflix did well in the niche that it picked, but failed to explain to the consumers what would be the reasonable expectations to have of the services they would get.

Analysis: Good leadership is what makes or breaks a company. The media industry is therefore home to many great leaders, however, the most visible face of media is Reed Hastings, CEO and cofounder of Netflix. While the article above is a bit older than most that we have used on this blog (Oct 26, 2011), it provides a good summary of Hastings' strengths and weaknesses as a leader. His good judgment and the ability to foresee the next opportunity in media is legendary. As a long-time customer of Netflix, I would have been hard-pressed to find fault with his leadership a year ago.

It seems, however, that the opportunities in this niche of the media service providers has hit a plateau, and though he has tried to continue with the trend of strong innovation, there is little to be done in order to really improve the service. The consumers are unlikely to want to pay more than they are currently paying - even the relatively small increase recently has led to serious frustration. The content providers, on the other hand, expect to be paid a lot for their product and can get these prices from other sources. Netflix has found the middle ground between quantity and quality, however consumers expect Reed Hastings to continue improving the service, whether or not that expectation is reasonable.

1 comment:

  1. I see the opportunity for a slight parallel to the Apple story. After Steve Jobs founded the company and led it to success, failures to keep up with competition led to a drastic fall of the company. After being expelled and that not helping anything, Jobs came back and fixed Apple.
    Interesting as the speculation is, however, I doubt that story will actually repeat itself, at least not exactly. Perhaps Hastings will simply leave, or the company will get back on its feet. Given the circumstances surrounding the sudden "collapse" of Netflix, I think the situation was light enough for the company and Hastings to easily survive.

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