Netflix Looks Back on Its Near-Death Spiral

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For Reed Hastings, the chief executive of Netflix, the worst part of the company’s 2011 self-inflicted Qwikster debacle, in which Netflix tried to both raise prices and spin off its DVD-by-mail business, wasn’t the parody by “Saturday Night Live,” the scathing media criticism or even the dizzying plunge in the company’s stock price from almost $299 in July 2011 to about $53 last September.

Reed Hastings of Netflix said he suffered “the private shame of having made a big mistake.”
It was the thousands of e-mails that poured in from angry and disappointed customers.

“I realized, if our business is about making people happy, which it is, then I had made a mistake,” Mr. Hastings told me this week, in a rare public comment on an episode that could have destroyed the company. “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.”

This week, Netflix announced that it gained three million subscribers globally in the first quarter and that revenue for the quarter exceeded $1 billion, a record for the company. On Tuesday, the stock jumped 22 percent, the first time it has traded over $200 since the Qwikster episode, and it is up 135 percent so far this year, making Netflix the best-performing company in the Standard & Poor’s 500-stock index. The company is basking in the critical glow of its original series, “House of Cards,” and this month narrowly surpassed HBO in total subscribers.

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Plenty of people were urging him to take drastic steps to show the company was regaining momentum, like buying sports programming, offering a pay-per-view service or buying a hardware maker like Roku, which makes streaming players for televisions. “There was amazing pressure to come up with the shiny object that would make everything better,” he said. “But the phrase I used was, ‘There are no shortcuts.’ We weren’t going to find an idea or gesture that would make people love us again overnight. We had to earn their trust by being very steady and disciplined. And we had to be careful because we were on probation. We had to stick to what we do well and not lose confidence. I couldn’t say for sure we’d recover. But I was confident that our best odds were to be very steady and focus on improving the service.”

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