Netflix: Leveraging Big Data to Predict Entertainment Hits

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Case Details:

Case Code : ITSY075
Case Length : 18 Pages
Period : 2009-2013
Organization: Netflix
Pub Date : 2013
Teaching Note : Not Available
Industry : Service/ DVD rental/ Online video streaming services
Countries : US; Global

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Netflix has so thoroughly analyzed viewer patterns that they now know what viewers enjoy and don't enjoy - before viewers even see the show."

-Joe Kukura, in February 2013.

"We've entered an era when product decisions can be made not by analysis of demographics or user testing but by extremely fine-tuned measurements of current user activities designed to predict what new activities they will be eager to engage in."

-Damian Rollison, Vice President of Product and Technology, Universal Business Listing , in February 2013.

"My worry about BD (big data) was that it will steal spontaneity from our lives by figuring out what we like before we've even had a chance to decide."

-Mike Cassidy, in February 2013.

Netflix, a company which operated in the DVD-by-rental segment and in the video streaming segment, had, since its inception, garnered significant insights into the viewing patterns of its customers. It knew what shows they preferred viewing, the time at which they watched the shows, the devices on which they streamed the videos, and other such viewing nuances. According to observers, the company's big data capabilities had received a shot in the arm from the cloud computing infrastructure it sourced from Amazon Web Services. Netflix had initially employed this data to recommend movies and TV shows to its subscribers.

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However, with increased competition for broadcast rights of movies and TV shows which had their initial run and the reluctance on the part of some potential competitors to equip Netflix with movie and TV program ammunition, Netflix plunged into original programming. The company clinched the exclusive rights to the first and second seasons of the show “House of Cards” for a staggering US$100 million. According to industry observers, the company bid this amount after confirming that many of its subscribers were fans of the director, David Fincher, and the lead actor of the show, Kevin Spacey, and had been followers of the original "House of Cards" show . The show proved to be a roaring success, but the most incredible aspect, according to observers, was that Netflix executives were sure that it would succeed even before the first scene was shot.

However, some industry observers were concerned that Netflix would find itself on the wrong side of the law with privacy concerns being raised by some observers over the employment of big data capabilities to gauge the personal viewing habits of its subscribers. Others were apprehensive about the potential damage to Netflix's reputation due to its site being down on account of outages in Amazon Web Services. Analysts were also concerned about Netflix stretching itself financially to create a credible image for itself through original programming. Some industry observers were apprehensive that as companies such as Netflix, which had greater awareness about the audience's viewing habits, gained more prominence in the generation of original programming, they might begin influencing the creative decisions of even directors and writers.

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