A year after it raised prices and unveiled a plan to separate its DVD and online streaming businesses, Netflix is worth a fifth of what it was at its peak.
How did things go so badly wrong?
Well, there were several issues, starting with the fact that the stock was ludicrously overvalued at the peak. But Netflix also made some major mistakes.
A new history of the company, Netflixed, offers a simple explanation: CEO Reed Hastings created an engineering-focused culture which paid more attention to optimizing algorithms than to customers.
In an interview with CNET, Netflixed author Gina Keating says sources told her Hastings had an "emotional IQ of zero."
That meant that Hastings wasn't able to anticipate how Netflix customers would react to the price hike and the decision to move Netflix's DVD rental service over to a new business, Qwikster, which would require a separate login and monthly bill.
Here's how Keating described Hastings:
He just doesn't have any kind of empathy toward people in terms of consumers. I think with a lot of great CEOs, there's a little bit of a blind spot there. That was interesting to discover because knowing him for so long I never knew he had that. I just felt that he was one of the smartest CEOs I'd ever met and this little vanity thing was really interesting to me. I think maybe he just didn't value it very much. He didn't understand how important it was until Qwikster happened and it became very obvious to him.
You may be wondering, how did Hastings build such a big business if he didn't understand his customers? Keating suggests his co-founder, Marc Randolph, who has been largely written out of the picture had a lot to do with Netflix's success:
Netflix now is extremely different from Netflix when Marc Randolph was there. But the platform the founding team created and the attitude that they had about what they were doing -- that they were supposed to benefit customers first -- that was all Marc Randolph.
It's hard to believe that Hastings could build a wildly successful company over the course of a decade without having a pretty good sense of his customers. And even CEOs who obsess about their customers occasionally blow it. But we suppose there has to be an explanation for everything.
A Netflix spokesperson told Business Insider that the company wouldn't comment on Keating's book.
Read the entire interview with Keating here >
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