In 2012, Netflix estimated that 75% of the content its subscribers watch stems from some sort of recommendation. One of the most readily apparent ways Netflix creates value for customers is through its recommendation system. Although this post could not possibly not cover all of the ways in which Netflix uses data (in fact, that is likely not public information), it will attempt to highlight a few of the key ways the company uses data to create and capture value.
While traditional media players receive “ratings” for their content indicating viewership among key demographics (broken down by gender and age), Netflix knows who its customers are, what they are watching, where and on what device they are watching, how much of a movie or TV show they watch, the sequence in which they watch, and a plethora of other attributes. As a direct-to-consumer platform, Netflix has access to data traditional media players lack. Netflix, however, is revolutionizing the media industry, bringing data-driven decisions to a business historically driven by creativity. More than half of new broadcast series are cancelled after just one season, and nearly every year we see at least one highly anticipated film flop at the box office. The film and TV business has historically been considered hit-driven and relatively unpredictable.
