Netflix: A Categorical Catastrophe in Rhetoric
Netflix: A Categorical Catastrophe in Rhetoric
In 2011, Netflix suddenly, unexpectedly, and substantially increased its pricing structure. Netflix executives communicated this 60% price increase to its customers in an email that lacked even a modicum of Aristotle’s ethos, pathos, and logos and was nothing short of a rhetorical fiasco (Appendix A). The result was a net loss of more than one million subscribers and an almost 75% drop in stock price (Pepitone). In an attempt to remedy the situation and quell the subscriber exodus, Netflix CEO, Reed Hastings, sent an apologetic email to all Netflix subscribers (Appendix B). Filled with Machiavellian traits, subscribers reacted with equal animosity to Hastings’ email. Netflix’s emails demonstrate that even in today’s modern era, Aristotle’s rhetorical foundations of ethos, pathos, and logos remain valid and necessary for successful rhetoric. These three rhetorical foundations “work together in complete persuasive appeals” (Smith 72). Likewise, the elimination of Machiavelli’s corrupt traits is also a key to successful customer communications. Netflix’s emails to subscribers include elements of Machiavellian traits and are utterly void of Aristotle’s ethos, pathos, and logos, which, working in concert, doomed these communications to fail.
Aristotle believed ethos was “the most potent form of persuasion” (73). One key element that defines ethos is the author’s goodwill, or their ability to demonstrate that they “have the audience’s best interests at heart” (74). In Netflix’s first email to subscribers, executives attempt to demonstrate goodwill by offering subscribers a choice between streaming content, DVD rental, or both; however, any sense of goodwill established with that attempt is immediately destroyed when they notify subscribers the cost of their services is to increase 60%. Clearly, the substantial 60% price increase is in the best interest of Netflix’s financial bottom line, and conversely, not in the best interests of the audience, which prevents any amount of ethos from being established between Netflix and the audience. Subscribers were not blind to this dramatic shift in price structure and perceived the 60% increase as exorbitant and, subsequently, Netflix as greedy. Their perception of Netflix’s greed, one of Machiavelli’s corrupt traits, led subscribers to take action and unsubscribe in great numbers—an undoubtedly unintended consequence (205).
Also working to discredit the Netflix executives’ ethos in their first email is their character vice of perceived arrogance. In the statement following the price increase notification, Netflix executives state that subscribers can “easily” change or cancel their plans. The placement and blithe tone of the statement comes across as a dare to subscribers. Netflix had experienced an incredible subscriber growth in the previous year, and this statement implies that Netflix executives are so overtly confident in the popularity of their service and the dedication of their subscribers that even a sudden and unexpected 60% price increase could not convince them to cancel.
Two months and 800,000 unsubscribers later, it seems clear that Netflix executives began to understand the idea that “the audience’s perception of the credibility of the persuader plays a key role in whether persuasion is achieved” (McCormack 136). With this concept in mind, Netflix CEO, Reed Hastings, attempted to use his credibility as CEO and crafted a second email to subscribers. This email is a blatant attempt to showcase his “wisdom, goodwill, and virtue” toward Netflix’s subscribers (Smith 75). Unfortunately, this second email fails to an even greater extent to develop ethos with subscribers because it contains several corrupt Machiavellian traits. Hastings “sincerely” apologized to subscribers for the price increase, but his email was received as anything but sincere; rather, subscribers viewed it as forced and utterly insincere because he waited two months before speaking a word about the contentious subject. His slow response to widespread subscriber outrage did little to convince subscribers that “they can trust the speaker’s [Hastings’] motivations, intentions, and knowledge…[and] believe that the speaker has no hidden motives, will not manipulate or trick them, and has their best interests at heart” (Wrench).
Additionally, Hastings’ Machiavellian traits oozed throughout the second email as he continued to keep his company’s revenue growth front of mind, rather than the feelings or satisfaction of Netflix subscribers. While studies have shown that Machiavellian tendencies may have “short-term success…[they] lead to problems in the long term…[and] the group will generally lose the more you win” (Chamorro-Premuzic). In this case, the short-term success can be seen in financial applause from investors as “the stock rose to an all-time closing high of $42.68, with investors drawn to the additional revenue per subscriber” immediately following news of the price increase (Rodriguez). The losing group in this instance is Netflix subscribers as Hastings neither backed down from his decision to increase subscription prices by 60%, nor did he offer subscribers any type of incentive or thank you gift for maintaining their subscriptions (e.g., a free DVD rental, a free month of subscription fees, etc.). In fact, Hastings, like many Machiavellian leaders, was “less concerned with [subscribers’] feeling,” and more concerned with himself and his company’s well-being (Drory 85). He makes no attempt to assuage his audience’s ire generated by the sudden price increase and “continues to appear more self-interested than customer-oriented,” which is a distinct Machiavellian mindset of having “the ends justify the means” (Phillips).
Hastings also broke one of Machiavelli’s cardinal rules to “never appear arrogant, devious, frivolous, weak, unfaithful, or wanton because people hold such attitudes in contempt” (Smith 205). From the outset of Reed’s email, he appears disingenuous and condescending. His apology is something he knows he must do to save face with Netflix’s remaining subscribers and to help stop the deluge of subscription cancellations. However, Hastings begins his email by stating, “many members felt we [Netflix] lacked respect and humility” in the first email that announced the price changes. If Hastings wanted to genuinely apologize to subscribers, he would have taken full responsibility for the rhetoric Netflix produced. He could have reworded that sentence to state something to the effect of, “I apologize for the lack of respect and humility we showed to you in our price increase announcement.” In this example, Hastings would have shifted the fault of the poorly-constructed communication squarely on Netflix executives’ shoulders, rather than placing the blame for the poor reception of the email on the subscribers.
Throughout the email, Hastings also showcases a tone of condescension. Whether he is attempting to explain the business structure or place himself in the shoes of the subscriber by explaining how he is an everyday subscriber and how much he “loves” Netflix’s streaming service because he “can watch anytime [he] want[s],” Hastings exudes a condescending tone. It is difficult for subscribers to believe that Hastings, CEO of one of the largest video streaming companies in the world, is spending a lot of time at home binge watching Netflix anytime he wants. Subscribers perceived this fairly unbelievable scenario as condescending and untrue, which furthered their mistrust of Netflix. Hastings’ condescending tone is emphasized in his closing to the email when he states, “actions speak louder than words. But words help people understand actions.” At a time when subscribers were waiting for a reasonable explanation for the 60% price increase, Hastings allowed his universal vices to shine and worsen the already negative situation, working directly against Machiavelli’s advice that, although “it is unnecessary for a prince to have all the good qualities [e.g., merciful, faithful, humane, religious, upright]…it is very necessary to appear to have them” (Machiavelli 73).
When defining pathos, an understanding of the audience’s frame of mind, Aristotle stressed the notion that speakers and authors have the ability to put audience members into the right frame of mind with “persuasive intent…[as long as they] know how appeals to emotions work in rhetorical situations” (75). Netflix executives demonstrate in the first email that they neither understand subscribers’ frame of mind, nor how to appeal to their audience’s emotions. When addressing what is obviously a contentious subject (i.e., a 60% price increase that would take effect almost immediately), they opt to send an emotionless and matter-of-fact email. This robotic communication fails to appeal to the understanding or accepting emotions of the audience and, instead, only further infuriates and annoys subscribers, which is evident in the fact that more than one million subscribers chose to unsubscribe from the service.
Netflix executives also fail to include pathos in their communication when they do not recognize that “every audience is unique, and the idea that focusing on and catering arguments toward specific audiences is important” (McCormack 133). The Netflix emails are company-centered, rather than customer-centered. If Netflix had surveyed and garnered data to show “behavioral segmentation and other advanced data analytics that simultaneously account for customer demographics, attitudes, buying patterns, and related factors,” they could have not only identified “those customers who are most likely to defect,” but also created rhetoric that promoted additional subscription options to appease their various subscriber segments and, more likely, retain many of those subscribers even in the face of a price increase (Davenport).
Netflix executives also failed to recognize the need for audience pathos when they ignored the fact that audience members “can be moved or move along various continuums from central positions where emotions are at ‘rest’ to the extremities where they are felt intensely” also appears to elude the minds of Netflix executives (Smith 76). This increased emotional intensity is created through proximity, as well as the speaker’s ability to make the audience feel the issue at hand is near to them and will have a real effect on their lives. The 60% price increase is literally brought into each user’s home and wallet, making it a very close and very personal issue to each audience member. While a cost of $10 per month may be manageable to subscribers, a cost of $16 per month could easily seem excessive to subscribers on a tight budget or subscribers who do not utilize the service regularly. This extreme nearness in proximity works to exacerbate the negativity subscribers felt about the issue, and Netflix executives’ utter disregard for their audience’s frame of mind and the fact that “every argument [is] limited by the context in which it is made” fails to mitigate this negative effect in any way (McCormack 152).
While Netflix executives disregard the use of pathos in their communication by failing to recognize subscribers’ frame of mind regarding price increases, they also fail to include logos, or a “strategic use of reason” (Smith 80). They fail to offer any reason or evidence for the price increase in either of their two emails. As Aristotle noted, “evidence becomes the nucleus of the argument…[and] is used to support a conclusion” (Smith 80). A price increase is never a positive message to consumers; however, providing evidence for the increase can work to mitigate the negative response to such an unwanted communication. In fact, when provided with adequate evidence, audience reaction to negative communication can be neutral or sometimes even positive. For example, Netflix executives could have included news of a larger streaming movie library, faster DVD delivery, access to new premium cable TV shows, or any even discounted costs for subscribers who continue to subscribe to both the streaming and DVD plans. However, Netflix executives make no mention of any evidence and Hastings never includes an explanation for “how customers would benefit from the additional costs” in his email, foregoing any attempt to prevent its audience’s inevitably negative reaction to the news (Phillips).
If Netflix executives had used Aristotle’s rhetorical pillars of ethos, pathos, and logos correctly, and Hastings had kept his Machiavellian tendencies disguised or hidden, would they have succeeded in persuading their current customer base to continue with their subscriptions at a 60% price increase? Would any type of rhetoric have appeased customers facing a 60% price increase for a discretionary item that many subscribers could likely convince themselves was unnecessary even without the price increase? Possibly not. After extensive research, I was unable to find even one comparable company that handed out a substantial price increase to customers in one fell swoop and witnessed immediate success. This pricing scenario will likely never be repeated with Netflix, so Netflix executives will never have the chance to learn what the outcome could have been had they handled the situation with reliably successful rhetorical strategies and tactics.
However, let’s consider a scenario where Netflix’s price increase more closely resembles Starbucks’ strategy. While customers routinely enjoy Starbucks’ line of coffee drinks, much like Netflix’s streaming service, Starbucks products are highly discretionary and, although Starbucks’ coffee is not cheap, they are not typically cost prohibitive when enjoyed in moderation. This combination of discretion and coffee prices low enough for the average buyer to rationalize as acceptable, as well as caffeine addiction, helped make Starbucks the largest retail coffee shop in the United States in 2016 (Statista). Starbucks’ growth throughout the years is a result of many factors, including routine increases in their prices. How does Starbucks continue to grow while regularly increasing prices? “Only certain regions are targeted for each price increase, and prices vary across the U.S. depending on the current markets in those areas” (Dawson). Additionally, Starbucks limits “price increases to specific drinks and sizes rather than the whole lot. By raising the price of the tall size brewed coffee exclusively, Starbucks is able to capture consumer surplus from the customers who find more value in upgrading to grande after witnessing the price of a small drip with tax climb over the $2 mark. By versioning the product in this way, the company can enjoy a slightly higher margin from these customers who were persuaded by the price hike to purchase larger sizes” (Dawson). Starbucks executives do not rely on rhetoric to convince customers to continue buying their product after a price increase. They strategically and minimally increase prices on specific products that Starbucks executives know their customers will continue to purchase as long as the price increase is minimal. Starbucks executives do not announce or attempt to explain a price increase; they simply implement it.
Inexplicably, Netflix opted to ignore the success of a similarly situated company, like Starbucks, and chose to implement a 60% price increase, rather than a minimal price increase or a tiered subscription option. If Netflix had chosen to implement a tiered pricing structure, they also could have taken advantage of the profit maximization that results from higher profit margins associated with more premium subscription options. Additionally, Netflix could have avoided a rhetorical nightmare that resulted in biggest business debacle in the company’s history. Would the tiered pricing structure have been successful if Netflix had implemented a 60% price increase in a premium subscription option, combined with a strategic rhetorical approach to the positioning of all their new subscription options? Are there enough evidence-based reasons available to support a 60% price increase? Do Netflix executives have so thorough an understanding of their subscribers’ loyalty to the company’s streaming services that they could confidently create incentivize and persuade subscribers to voluntarily choose the 60% price increase option? Unless Netflix chooses to take this tiered subscription route in the future, the answers to those questions may never come to fruition; however, if these two emails are an indication of the breadth of Netflix executive’s rhetorical skills, it is unlikely they will find success with a 60% price increase under any circumstances.
In 2011, Netflix executives failed to employ Aristotle’s most basic foundations for rhetorical success when they communicated to subscribers a sudden and unexpected 60% price increase. On even the most basic levels, Netflix executives ignore and do not utilize Aristotle’s ethos, pathos, and logos. Simultaneously, Netflix CEO, Reed Hastings, allows his Machiavellian corrupt traits to shine through to subscribers. Subscribers’ perception of these corrupt traits enraged and motivated them to act in a way that Netflix did not intend: to unsubscribe. Hastings also ignored Machiavellian tendencies of appearing to be humane and sincere, which could have worked in his favor in his apology email if he had sent the email immediately following the initial onslaught of subscriber backlash to the substantial price increase. This lack of utilization of successful rhetorical components in Netflix’s email communications resulted in long-term business turmoil from which it took Netflix years to fully recover. Although Aristotle and Machiavelli’s rhetorical theories, strategies, and tactics are ancient, the foundations of those theories, when unused or misused, can have astronomical and long-term negative effects on today’s modern businesses.
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