Netflix has been using data as their backbone since they came into the video rental service in 1997. Big data is defined as, “extremely large data sets that may be analyzed computationally to reveal patterns, trends, and associations, especially relating to human behavior and interactions.” Any business in our current digital age can benefit from using data, but it seemed that before our massive digital boom Netflix was already ahead of the curve in terms of using data from customers as a way to emerge as the primary video rental service. Netflix not only established better selection, convenience, and price compared to major competitors like Blockbuster, but it also put together a data-driven recommendations section for customers on their website which became a big influencer in customer retention and customer preferences. Moreover, it started to raise the bar for the video rental industry in terms of quality provided. By 2010 Netflix had taken over the number one online video rental subscription service.
Fast forward to 2019, Netflix continues to use big data better than ever. For example, Netflix algorithms save around $1 billion a year in value from customer retention. Netflix collects data on nearly every conceivable thing a user can do on their site or app. The data collected can be ratings (now replaced with thumbs up/thumbs down), searches, date and times movies/shows were watched, the device it is watched on, the nature of the shows and if they vary among devices, when a video is paused, what portions are re-watched, and if the credits are skipped…just to name a few. The data collected allows Netflix to learn both about the specific individual and how to market new things to watch to that user, but also Netflix’s users as a whole. A user on the app or website will see a recommended and trending section that is tailored towards that specific user, which can lead to them discovering shows/movies that they never knew they would like. In fact, the recommendation system influences 80% of the content streamed on Netflix. For users on a larger scale, Netflix will use the collected data to influence which content to put on their service next. They were able to use data to predict how popular the show House of Cards will be which led them to spending around $100 million on the series.
Gary King, a professor at Harvard University, said “Big data is not about the data. It is about the analytics.” In closing, it is crucial to acknowledge the importance of understanding data and how to analyze it. Without a proper understanding of data, or a team to handle it, the data will simply be a collection of unstructured numbers. “92% of the companies surveyed have experienced problems as a result of inaccurate data in the last 12 months (2015).” Having a team that understands data accompanied by a CDO (Chief Data Office) can be the difference between achieving the high standards of data collection and analytics by Netflix compared to a company failing like Blockbuster.