Case Study

INTRODUCTION TO DATA AND DATA SCIENCE DS100-1

Group 1 APPLIED DATA SCIENCE
Cyril Joshua M. Lucas, Jericho B. Casanares,
Reinos Saga, Hans Julian Caranto, Allan James Elarde
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NETFLIX

Background / History of the enterprise

By now, you should be familiar with the Netflix Corporation. Netflix is an online media streaming
service that provides on-demand access to Series and movies. It also provides a service in
which DVDs are mailed to a customer's home and returned once they have completed watching
the film. Netflix is a subscription-based service. Those interested in signing up for Netflix can
create an account and pay for the service every month. Netflix is available on various platforms,
including computers, X - box, PlayStation 3, smartphones, tablets, Smart TVs, and more.

Marc Randolph and Reed Hastings founded Netflix in 1997 in Scotts Valley, California. They had
previously collaborated at a firm called Pure Software. Randolph was a co-founder of
MicroWarehouse, a computer mail-order company, and later worked for Borland International as

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vice president of marketing. Hastings founded Pure Software, which he sold for $700 million
recently, and he put $2.5 million into Netflix as seed money.
When Hastings forgot to return a movie by the due date and had to pay $40 in late fees, he
came up with the idea for Netflix. On April 14, 1998, the website went live with a more standard
pay-per-rental model. In September 1998, Netflix began the monthly membership model. Since
then, Netflix has built its reputation for flat-fee unlimited rentals without complications such as
due dates, late fees, or shipping and handling fees.

By 2005, Netflix had 35,000 movie titles and shipped out 1 million DVDs every day. Although the
company delivered its one billionth DVD in February 2007, it shifted away from its initial primary
business model of mailing DVDs. It offered video-on-demand through the Internet, as well as
live streaming. Netflix's Red Envelope Entertainment section has even licensed and released
independent films.

The role of Data Science / Data Analytics in transforming/innovating the enterprise

Netflix has 203.67 million customers globally as of 2021, allowing it to rule and remain the
number one Above-the-Top (OTT) streaming entertainment platform over other major
corporations such as Disney and Hulu. Their success is thanks to their advanced Data and
Analytics. Netflix's recommendation technology allows them to make customized movie and TV
program suggestions to their subscribers. Estimate the popularity of unique material before it is
approved (or not). Make marketing content, such as trailers and thumbnail photos, more
personalized. Improve general technical and corporate decision-making by optimizing
production planning.

Netflix data scientists have a lot of autonomy, which aligns with the company's "Context not
Control" approach. Their approach allows them to identify and prioritize the activities that will
significantly impact the organization. However, they are equally responsible for owning the
problem using these methods. According to Netflix's corporate blog, "full ownership frequently
entails constructing new data pipelines, negotiating difficult schemas and enormous data sets,
generating or upgrading business performance indicators, and producing intuitive visualizations
and dashboards — all with an eye toward actionable insights."

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Netflix can forecast what you'll watch next by applying various algorithms to this data and
organizing selections into rows depending on an individual's watching preferences. If you're a
Netflix customer, you've probably noticed that it lists the shows you're most likely to watch on
the upper left side of the screen and then moves on from there. In reality, Netflix's
recommendation algorithm is responsible for 80 percent of the content consumed on the
service.

Netflix's content production is dependent on their data and analytics; Queen's Gambit is a
perfect result of this. Many Netflix shows may appear subversive or high-risk to the casual
viewer. After all, there aren't many networks TV shows about prisons or chess champions. On
the other hand, these decisions did not appear to Netflix to be hazardous or brave. Although
Netflix claims that people, not robots, make the final decisions, it does utilize a projection model
to guarantee that the project being commissioned or renewed falls within "certain criteria," or
how comparable programs have done in the past.

Steps done by the Analytics team based on the Analytics lifecycle

Netflix has valued at over $164 billion and even surpassed Disney as the most respected media
company in the world. This is due to their impressive customer retention rate, 93%. However,
their success is not because of their ability to retain their million subscribers. Netflix’s success is
because of big data and analytics.

The company collects a large amount of data from its users. This data comprises viewing day,
time, location, searches, and device used. They also know if the show was paused by the user,
resume watching after pausing, people finish the entire show, etc. With this data, Netflix can
create a detailed profile for its users. For example, they use a recommendation algorithm to
suggest shows and movies based on users' preferences. Netflix also uses big data and
analytics if they want to greenlight original content. This is based on touchpoints derived from
their user base. In addition, Netflix also encourages feedback from its subscribers. This will help
them if there are needs for improvement in the user interface.

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Netflix’s huge success is due to its ability to collect and use data from the beginning. They also
have been on the top by investing in data and algorithms. This resulted in better customer
retention because the recommendation system accounts for over 80% of the content streamed
on the platform. Netflix’s capability presents an incredible insight into every user’s preference,
allowing them to predict what their users are likely to watch.

Methods/resources used by the team

Netflix didn’t rely on luck to be successful; instead, they used different methods to fulfill the
needs of both the market and their own company. One primary instrument that pushed them
forward was the Internet. Using the internet as a medium to distribute movie rentals made it
more convenient for people to rent movies without even going to the stores. This made Netflix
unique, propelling its growth forward little by little.

In this case, study, analyzing the pattern which Netflix used to create a flexible system that
enables them to learn more about the interests of their users led them to a quantitative
approach. Considering the algorithms and the way they gather the data that contains the
interactions of their users, they managed to provide recommendations based on these
collections of choices. If you observe closely, most of the movies or shows you watch are
related to your interests and past actions. This showcased their way of analyzing big data to
create solutions or, in this case, suggestions to their customers.

This case study also highlighted the contribution of data analytics to their business decisions
like knowing what is going on about a particular product they’re advertising or recommending if
something is wrong with their product, they make solutions based on how people interact with it,
and this is made possible by data analytics. It is also discussed that data analytics helped
manage their business economy to reduce expenses. To prove their statements, they used the
analytics model of Netflix as a resource to understand these patterns they implement into their
systems. They also used different statistical data to compare Netflix’s performance among the
other movie streaming sites that Netflix competes with.

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Results

Data Science plays a critical part in most online businesses, not only in attracting new clients
but also in retaining existing ones. This is because Data Science provides a more realistic
image of your customers' preferences in the form of graphs and charts that employ multiple
metrics as input. This vital piece of information aids you in molding your products and services
in a way that appeals to your clients as unique, bringing them to your platform.

The Data Science and Engineering team at Netflix is in charge of applying analytics at scale.
Data scientists are incorporated into business units such as product development, content,
membership, studio marketing, and platform, rather than acting as a traditional COE
department.

Netflix's success is due to Big Data, which is capable of dealing with incredibly massive volumes
of data, which makes sense given that Netflix deals with content and a plethora of related
meta-data.

Given how long Netflix has been in the streaming business, it has amassed a wealth of
information about its customers, including their age, gender, location, and media preferences, to
name a few.

Netflix can not only forecast what you'll watch next by applying a number of algorithms to this
data, but it can also arrange selections into rows depending on an individual's viewing
preferences. If you're a Netflix customer, you've probably noticed that it lists the shows you're
most likely to watch on the upper left side of the screen and then moves on from there. In reality,
Netflix's recommendation system is responsible for 80 percent of the content consumed on the
service.

With many users, each one generates hundreds of ratings per day based on what they watch,
search for, and add to their watch list; this data eventually becomes Big Data. Netflix saves all of
this data and uses machine learning algorithms to create a pattern that indicates viewers'
preferences. Because everyone's taste is different, this pattern may never match another
viewer.

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When it comes to developing a new show or movie, data plays a critical role. Before anything is
written down, there is a lot of brainstorming, and here is where data comes in. With prior
expertise in developing new and original content and a wealth of data on how viewers received
previous material, Big Data can assist in identifying potential solutions to many of the difficulties
encountered during the planning process. Identifying shoot locations and the time and day of
the shoot are examples of these problems. Even with modest prediction models, Netflix can
save considerable time and money by minimizing planning efforts.

Big Data is crucial in not only determining how Netflix operates and providing them with new
options to expand. New technologies often carry their own set of problems, but Netflix has
consistently confronted those problems by soliciting community feedback. Netflix hopes to
enhance not only itself but also other businesses by open-sourcing numerous of its libraries and
frameworks. Finally, it would be inaccurate to suggest that Netflix makes all of its choices based
on Big Data insights because they still rely on many human inputs.

References:

Mixson, E. (2021, March 30). Data Science at netflix: How advanced data & analytics helps
Netflix generate billions. AI, Data & Analytics Network. Retrieved March 19, 2022, from
https://www.aidataanalytics.network/data-science-ai/articles/data-science-at-netflix-how-advanc
ed-data-analytics-helped-netflix-generate-billions

How Analytics can be a Game Changer: A Netflix Case Study - Markivis

How Netflix Became a $100 Billion Company in 20 Years | Product Habits

How Netflix used big data and analytics to generate billions - Selerity (seleritysas.com)

How Data Science is Boosting Netflix | by Claire D. Costa | Towards Data Science

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