Tim Bornholdt

Netflix's lost year: The inside story of the price-hike train wreck

Some great behind-the-scenes insight behind the last year of Netflix.

It's interesting that 2 years ago, everybody absolutely had to have a Netflix subscription. Now, with rival services like Hulu Plus and Amazon Prime catching up to their instant watch selection, Netflix isn't as crucial anymore.

Jonathan Friedland, the new vice president of global corporate communications who had joined Netflix just a few months earlier, asked whether customers on tight incomes might object to the price hike, according to people at Hastings' meeting. Hastings argued that Netflix was a great bargain. He said he knew that some customers would complain but that the number would be small and the anger would quickly fade.

Hastings was wrong. The price hike and the later, aborted attempt to spin off the company's DVD operations enraged Netflix customers. The company lost 800,000 subscribers, its stock price dropped 77 percent in four months, and management's reputation was battered. Hastings went from Fortune magazine's Businessperson of the Year to the target of Saturday Night Live satire.