What does Netfliz know about the cultural ecology of movies and television programs? After all, they can and do track the viewing preferences of all their customers.
The Atlantic Monthly has an article on their tagging and analysis capability:
Through a combination of elbow grease and spam-level repetition, we discovered that Netflix possesses not several hundred genres, or even several thousand, but 76,897 unique ways to describe types of movies....Netflix has meticulously analyzed and tagged every movie and TV show imaginable. They possess a stockpile of data about Hollywood entertainment that is absolutely unprecedented.
Hmmmm....77K ways to describe movies? Perhaps, but I'm thinking that's likely to be superficial. Still, they DO know something even if that number doesn't capture that something in a useful way:
Using large teams of people specially trained to watch movies, Netflix deconstructed Hollywood. They paid people to watch films and tag them with all kinds of metadata. This process is so sophisticated and precise that taggers receive a 36-page training document that teaches them how to rate movies on their sexually suggestive content, goriness, romance levels, and even narrative elements like plot conclusiveness.
They capture dozens of different movie attributes. They even rate the moral status of characters. When these tags are combined with millions of users viewing habits, they become Netflix's competitive advantage. The company's main goal as a business is to gain and retain subscribers. And the genres that it displays to people are a key part of that strategy. "Members connect with these [genre] rows so well that we measure an increase in member retention by placing the most tailored rows higher on the page instead of lower," the company revealed in a 2012 blog post. The better Netflix shows that it knows you, the likelier you are to stick around.
A bit later:
A fascinating thing I learned from Yellin is that the underlying tagging data isn't just used to create genres, but also to increase the level of personalization in all the movies a user is shown.
Um, err, yeah. Surely that's the point, not this pseudo-genre stuff. Still, the article's worth at least a quick read if you're interested in such things.
Color Felix Salmon skeptical about all that gee-willikers stuff. He's not all that impressed by Netflix's ability to make cogent recommendations to users. Why?
Netflix’s big problem, it seems to me, is that it can’t afford the content that its subscribers most want to watch. It could try to buy streaming rights to every major Hollywood blockbuster in history — but doing so would cost hundreds of billions of dollars, and could never be recouped with $7.99 monthly fees. What’s more, the studios can watch the Netflix share price as easily as anybody else, and when they see it ending 2013 at $360 a share, valuing the company at well over $20 billion, that’s their sign to start raising rates sharply during the next round of negotiations. Which in turn helps explain why Netflix is losing so many great movies.
As a result, Netflix can’t, any longer, aspire to be the service which allows you to watch the movies you want to watch. That’s how it started off, and that’s what it still is, on its legacy DVDs-by-mail service. But if you don’t get DVDs by mail, Netflix has made a key tactical decision to kill your queue — the list of movies that you want to watch....
So Netflix has been forced to attempt a distant second-best: scouring its own limited library for the films it thinks you’ll like, rather than simply looking for the specific movies which it knows (because you told it) that you definitely want to watch. This, from a consumer perspective, is not an improvement.
And then we have Netflix's human resource policies, which are both common sense and, thereby, amazing. Here's an article from the Harvard Business Review's blog by Patty McCord, who used to be chief talent officer at Netflix. For example:
When Netflix launched, we had a standard paid-time-off policy: People got 10 vacation days, 10 holidays, and a few sick days. We used an honor system—employees kept track of the days they took off and let their managers know when they’d be out. After we went public, our auditors freaked. They said Sarbanes-Oxley mandated that we account for time off. We considered instituting a formal tracking system. But then Reed asked, “Are companies required to give time off? If not, can’t we just handle it informally and skip the accounting rigmarole?” I did some research and found that, indeed, no California law governed vacation time.
So instead of shifting to a formal system, we went in the opposite direction: Salaried employees were told to take whatever time they felt was appropriate. Bosses and employees were asked to work it out with one another. (Hourly workers in call centers and warehouses were given a more structured policy.) We did provide some guidance. ... Senior leaders were urged to take vacations and to let people know about them—they were role models for the policy. (Most were happy to comply.) Some people worried about whether the system would be inconsistent—whether some bosses would allow tons of time off while others would be stingy. In general, I worried more about fairness than consistency, because the reality is that in any organization, the highest-performing and most valuable employees get more leeway.
We also departed from a formal travel and expense policy and decided to simply require adultlike behavior there, too. The company’s expense policy is five words long: “Act in Netflix’s best interests.” In talking that through with employees, we said we expected them to spend company money frugally, as if it were their own. Eliminating a formal policy and forgoing expense account police shifted responsibility to frontline managers, where it belongs.
They've also eliminated formal performance reviews, which weren't terribly useful in actually improving anyone's performance.
And so forth.