Tuesday, October 11, 2011

Netflix and the Myth of Transparency in the Modern Age

A few days ago, Netflix announced that it would not, after all, split the company in two. You know the story -- recognizing its future is in streaming media, Netflix set out to create separate companies for its DVD and Streaming businesses.

When the company met with a very bad reaction from customers (and a lot of other constituencies), it retracted the plan. Some press described Reed Hastings a "chastened", among other words.

There are probably a number of lessons here. But, I believe the lesson in this episode is that transparency in the new media age is a myth. Netflix was attempting to be the ultimate in transparent: acknowledging to the market that its future was not in DVDs and a new company needed to be formed. It wasn't hiding that fact or playing games. Just taking steps and moving ahead.

A lot of people say that in today's world of 24/7 communications, the market figures everything out and you might as well just admit what you are doing and not try to manage your communications. Netflix did just that and was roundly punished for it.

The reality is it's critical to be a bit cagey in today's world. Or alternatively, do what you want to do but don't acknowledge or admit it. We have seen Facebook, Amazon, Google and many other companies do that repeatedly in recent years. And despite exclamations to the contrary, some of these moves might be a just a little evil.

Netflix was actually trying to not be evil. And it was vilified.

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