Note: I think it’s important to confess that I’ve never studied economics or politics or any sort of anthropology or social engineering so when I ramble on about capitalism, and my mild admiration for it, take into account that I’m about as educated on the subject as a wet brick. I was also a self-proclaimed Communist a few years ago.
I’m not a Fat Cat. Or a Capitalist Pig. Or by any means a die-hard supporter of The Man. In fact, after watching Inside Job, I’m ready to go camp out on Wall Street with all the other loons. However, the recent decline of Netflix has clearly demonstrated two things: firstly, that the theory of capitalism as the purest form of personal freedom does indeed hold water and, secondly, that businesses – any business – should mistreat their customers at their own peril.
It’s surprising (and perhaps somewhat unfashionable right now) to consider that sometimes capitalism works.
The Rise & Fall Of Netflix
Netflix is a behemoth, a stupidly big behemoth that, apparently, sucks up 33% of the entire Internet traffic in the US. By anyone’s standards, that’s just insane. The company has grown massively since its move into digital streaming and stands as a real glowing icon for the success of Internet ventures, paving the way for direct digital access to entertainment material and proving that the web is indeed the ultimate future of all humanity. Or at least it was.
For those of you who don’t know, Netflix is a video streaming service (as well as a more traditional DVD postal rental service) that lets you watch films and television shows directly on your Wi-Fi enabled TV, set-top box, games console, computer or tablet all for a monthly fee. A few months ago, radical price restructuring was announced that included a massive increase in the cost of their basic DVD and streaming subscription – a leap from $10 to $16, a whopping 60% increase.
Netflix forgot that it was a service company who relied on the goodwill of their consumers
Customers were not happy and took to the Internet in droves to publicise their abhorrence at the huge price punt. This would’ve come as no surprise to Netflix who expected a certain amount of unhappiness and loss of business. What came as a genuine shock to everyone though was just the sheer number of customers who actually followed through their with complaints and quit the service in protest. 800,000 people, a considerable chunk of the company’s 23 million subscribers, put their money with their mouth was and left. Fast forward to the end of the third quarter 2011 and Netflix’s stock has dropped by a gobsmacking 37%.
Investor confidence is gone.
The Theory Of Capitalism
Anyone can point out that in practice capitalism doesn’t work. And they’d be right. But it also fails for the same reason that any form of political philosophy or economic theory fails: human greed and corruption. Of course capitalism is never going to truly succeed in the ‘real world’ when petty beings are consumed by greed or power and conspire together to trick and deceive the consumer. Capitalism completely fails when the individual, you and me, are left with no other options to turn to because all of our suppliers – the ones we just can’t live without (gas, electricity, banking etc) – are in premeditated cahoots to screw us over together.
But the theory is sound.
Capitalism is about personal freedom and the ability to make choices, whether good or bad. It’s about giving everyone the freedom to chose what they consume, use and participate in, with the option that if you want to do something better, you can get off your arse and do it yourself. In a practical sense this means that if you don’t like what a company is selling, you don’t buy from them and go somewhere else instead. It is the ultimate epitome of survival of the fittest and insurance that companies have to keep their customers happy as all costs as they are the ones that ultimately control the future of the business. A lot of people call this phenomenon voting with your wallet.
Capitalism is about personal freedom and the ability to make choices
As the founder of a business this principle spurs me forward every day. If what we produce, what we create, what we sell isn’t good enough then we won’t earn enough money to put food on our tables but if we are good, if we are great, if we are better than everyone else, we will profit and succeed. Netflix forgot about this concept and started to see their customers as resources for profit manipulation rather than as the human beings who allow the business to continue. They treated their customers badly and they suffered as a result.
Remember, Customers Are God
Of course, Netflix is still making money, lots of money, more money than ever in fact, but that’s not the moral of this story. I wish I could say it was but the world is an unfair place filled with incidents that provide interesting subject material yet don’t quite manage to give blog posts just and appropriate endings.
What we can learn from all of this though is that hubris can easily be a step in the direction of downfall for any business and that following cold, calculated statistics rather than the best interests of your customers can lead to very negative consequences. Netflix forgot that it was a service company who relied on the goodwill of their consumers and instead treated them like numbers to be simply crunched and forgotten. In the end they paid the price.
Anyway, I’ll leave you with this trailer for the wonderful Inside Job for you to watch and ferment over with rage. Power to the people, comrades.