What Is Netflix's Ethical Dilemma

Imagine being completely dedicated and embedded in a company and suddenly that company one day up and turns its back against you. This is exactly the ethical dilemma Netflix faced with its subscribers in September of 2011 when the company wanted to become two separate entities. Netflix founders Reed Hastings and Marc Randolph decided to have “instant viewing” for subscribers as one entity and the other be called Qwikster which allowed viewers to rent movies and games the original DVD in the mail way. This change also brought forth pricing changes for subscribers. Instant viewing would cost subscribers eight dollars per month or you could have that along with Qwikster for fifteen dollars per month. Subscribers were then notified of the new changes by Netflix via email and within a month over 800,000 subscribers canceled their accounts. Founder Reed Hastings would soon apologize and Netflix remained with its traditional ways of operation. Did

Netflix ultimately do the right thing by diminishing the idea of their new model? To decide I will go in depth with the case by using the Potter Box model.
Firstly Netflix has many values. As a company they value customers/subscribers, easy access, originality, uniqueness, and development. The most important value Netflix has is its customers, without them Netflix wouldn’t be half of what it is today. Furthermore, the customers are arguably what has kept Netflix in the video streaming industry to this day. If it wasn’t for so much public backlash and criticism to the proposed two entity system who knows if Netflix would still be around today. Netflix like any other company needs positive revenue to stay in existence, so valuing customers and their opinions matter significantly. Next, Netflix is easily accessible, whether it’s mobile use, on a laptop, through cable provider, and even gaming systems! Netflix can be used just about any and everywhere which sets it apart from video streaming competitors. This directly correlates with the company’s originality and uniqueness. Found directly on the Netflix website it states “Netflix is a global Internet TV network offering movies and TV series commercial-free, with unlimited viewing on any Internet-connected screen for an affordable, no-commitment monthly fee. Netflix is a focused passion brand, not a do-everything brand: Starbucks, not 7-Eleven; Southwest, not United; HBO, not Dish.” (Netflix, 2016) Netflix in turn is comfortable with being different and setting its own standard in the video streaming market. For that attitude Netflix has become so popular, since 2013 it has had revenue to create original content series which other competitors don’t have. The last value Netflix has is development. Netflix has become the video streaming juggernaut today because it has been a company that was willing to improve and develop over time. Netflix states on their website “We are about a personal experience that finds for each person the most pleasing titles from around the world. To deliver this experience to our members, we expect to spend over $800 million on technology & development in 2016.” (Netflix, 2016) Netflix further states “The US contribution margin structure we have chosen is to grow content spending plus marketing slightly slower than we grow revenue, increasing our contribution margin to 40% by 2020. We think we can grow to 60-90 million members in the US, based upon our trajectory to date and the continued growth of Internet TV.” Ultimately Netflix has implemented goals and at this rate being a company that is open to improve is vital to why it’s successful.
To further understand the case, Potter Box principles, Kant’s Categorical Imperative, Communitarianism and Rawls’ Veil of Ignorance are philosophies that can put the values to the test. Kant’s Categorical Imperative implies that you should do to others as you would do to yourself. In this instance would the founders Hastings and Reed abruptly change the price consumers pay if they were consumers themselves? Also would they find it fair if these random price changes were emailed to you? In hind sight no, being a company owner your mind is rarely ever thinking totally as a consumer. Reed and Hastings were thinking like any company owner would, which is how are they going to get more money and in what way. At the time they believed creating a new system would work for how consumers watch content. Company owners are people too and have bills and deadlines, if they were abruptly hit with a fee increase of some form via email they too would feel betrayed in some fashion. On the other hand consumers must be in the shoes of the company owners. Society teaches us to get money and unfortunately at times any way possible. Being a company owner you are always thinking of ways to make another dollar and better your company. Not every idea will work but to succeed one must fail. Which is why Kant’s Categorical Imperative brings in to question this case, because company owner and consumer have two different thinking patterns. Communitarianism emphasizes on an individual and a community. The individual being Netflix and the community being the millions of subscribers across the globe. In regards to the case the community loved the simplicity of Netflix and the current pricing. By having a community Netflix can become an ongoing business. The last principle that can relate to the case is Rawls’ Veil of Ignorance. This principle tells us to assume we don’t know what position we hold as a stakeholder, thus removing our personal interest. This principle is key because it forces both owner and subscriber to consider the perspective of the case from all members of society. If Hastings and Reed were forced to think through the veil of ignorance would they find it justifiable to pay up to seven more dollars per month? This answer varies greatly depending on the class of society you identify with for the case. The rich class will have different views than the poor class because Netflix for the poor is seen as a privilege or a want. While the rich class in society simply overlook the Netflix price increase and go on about life.
The last ethic of the Potter Box to further the case is loyalties.

The loyalties Netflix has is to its subscribers and the founders are loyal to each other. First and foremost Netflix must remain loyal to its customers because that’s where revenue comes from. Without the millions subscriptions Netflix could possibly be out of business like Blockbuster. However Netflix knew subscribers is what keeps the company popular and they remained loyal to them. In an article titled ““I messed up,” Netflix CEO says” written by the CNN Wire staff Reed Hastings said “I messed up, I owe everyone an explanation." Hastings knew in the end Netflix’s wouldn’t prosper if the subscribers wouldn’t back his and Randolph’s decisions. Lastly, Hastings and Randolph must remain loyal to one another because they are co-owners of a big time company. They must trust and have faith in each other so they can both make the company the best it can. Loyalty in co-ownership is significant because if feuding begins it could hinder Netflix

greatly.
After using the Potter Box to understand the case in more depth, to answer the ethical dilemma if Netflix did the right thing by withdrawing from their two company idea the answer is yes. Netflix ultimately made the best ethical decision by sticking with its subscriber’s opinions. Netflix founders Hastings and Randolph knew their value and loyalty to subscribers was for the greater good of the company. Hastings said in his apology “In hindsight, I slid into arrogance based upon past success, we have done very well for a long time by steadily improving our service, without doing much CEO communication.” (CNN, 2011) Hastings continued saying, "There are no pricing changes (we're done with that!)." To go a step further and place myself in the perspective of the subscribers and the owners I would have done nothing different. If I’m a loyal subscriber I have the right to be upset about change and price increase, especially if hearing about such a drastic change via email. As the owner I would have withdrew the idea simply because so much revenue was being lost at the time. To conclude Netflix did the right thing and it’s the reason why Netflix is the number one video streaming option today!