Fascinating article on GigaOm today about how Netflix will use its enromous troves of user data to license and promote original content. Netflix keeps data on each of its users viewing and rental habits. It uses that data to suggest content that they might like and also to manage demand for its physical movie collection. It’s data and recommendation engine have been a critical reason for the service’s stickiness and success. (This HBS case study has a lengthy description of the Netflix model and explains the importance of the recommendation engine if you’re really interested.)
Now, Netflix will capitalize on its huge quantity of user data in licensing its own new shows, not just streaming television content. Netflix announced this week that it would run a new show called House of Cards, a political drama based on a book by Michael Dobbs. It chose the show after analyzing its user data to figure out what type of show would be popular with its subscribers. It will also use individual user data to recommend the show to customers that are likely to enjoy the show. With these data resources, it has far more certainty in its choice of show than the average television network. It’s a fascinating innovation on Netflix’s core business, and I’ll be interested to see where it goes from here.
In particular, I wonder if Netflix could sell similar data servies to major networks thinking about what new shows they should run for a given season. Buying access to representative samples of Netflix user data could give them better visibility into what shows will play well and to what targeted audiences. The data could be far more granular than the Nielsen ratings that they use now.
Computer processing power and storage have gotten cheap enough to make these enormous databases really useful. Movies are just one industry where data like Netflix has could be really useful. Think about all of the information that firms like Amazon, Newegg, or Twitter could bring to the table.