Netflix, or that thing 30 percent of the people watching this right now have open in another
tab, is the world's most popular streaming service with some 70 million plus subscribers.
For anyone who's ever been a little curious about that benevolent red logo that contains
so many streaming options, here are few little-known facts about Netflix.
The mythical origin story
You might've heard the story about how Netflix founder Reed Hastings got the idea for the
company after being slapped with a $40 late fee from Blockbuster after returning his rental
of Apollo 13 past its due date.
That revenge narrative might be nice and all, but the real story is a lot more complicated.
Hastings basically made the tale up as a buzzy beat for crowds, but the truth was that he
co-founded the site with the help of Marc Randolph through a long and complicated process
that would've been a lot less headline-friendly.
As Randolph remembered, they first got the idea for mail-in orders from Amazon and tested
out DVD durability by mailing one another a CD and seeing if it could survive the transit.
When it did, they got busy creating the catalogue queue and no-late-fee model and started counting
up their subscribers.
Bye bye Blockbuster
When Netflix first began, it was a mail-order service for movies and TV titles that offered
a convenience factor above the local brick and mortar Blockbusters -- where you'd have
to grapple with finding a disc on its shelves and face hefty late fees if you turned it
in too late.
But Netflix wasn't initially aiming to make its central competitor obsolete; quite the
opposite.
In 2000, the company offered Blockbuster the chance to buy it out for $50 million and get
in on the digital streaming game during its inception.
That might seem like a deal now, but at the time, it was a scoffable offense to the former
powerhouse chain.
When the offer was made, Netflix was actually hemorrhaging money which meant that the valuation
of $50 million was way more than the company was actually worth.
Also, Netflix didn't just want to be absorbed by Blockbuster; they wanted to partner up
to front the company's entire online presence.
So, basically, it was a situation where a feisty up-and-comer company went to its goliath
rival and demanded money and power.
"Um, here's a suggestion; um, have the money by tomorrow and there won't be any problems."
You can see why Blockbuster declined.
Of course, in retrospect, it was the first of many colossal mistakes that would bring
Blockbuster down and earn some serious schadenfreude from all the mom-and-pop video shops that
were destroyed during its own rise.
But that's another story altogether.
Adjusting the algorithm
Although Netflix got its start in postal pictures, it's now been dwarfed by its own digital game.
And while several competitors have since popped up, including Hulu and Amazon Prime, Netflix
is still a mogul in the marketplace, thanks in large part to its unique approach to algorithms.
While some services might simply classify a movie or show based on their MPAA ratings
or genres, Netflix takes great lengths to catalogue the titles in its library with more
specific tags, like what era the movies take place in, whether they were critically acclaimed,
and if they belong to a niche sub genre.
"Is there any chance you like monkeys?"
In 2014, a curious statistician worked through the code of Netflix and found the site has
over 75,000 different "micro-genres" that it uses to categorize movies and shows.
These genres are largely hidden from the user, and most people will rarely see even a fraction
of them while browsing, but that's also kind of the point.
They'll tuck away those pics about werewolves on wheels in place of family cartoons about
unicorns if that seems to be your thing.
And they can tell what you're really into because ….
Tracking devices
One of the most valuable assets at Netflix's disposal right now is its subscriber usage
data.
Along with collecting key information like what you watch, when you watch it, and for
how long, Netflix also pinpoints when you pause, rewind, or stop watching something
in an attempt to figure out why.
"No, no , no, go past this, past this part.
In fact, never play this again."
This data on its own isn't all that useful.
But when cross-referenced with geographical information and the same data produced by
its millions of fellow subscribers, it can be used to produce comprehensive charts detailing
exactly what people watch … and what they give up on halfway through.
Netflix guards these details under lock and key, but it does help them figure out what
belongs in the permanent library collection and what can be purged after a few months.
So remember kids, the next time you press pause, you may just be holding the fate of
a feature's future in your hands.
Original content
Thanks to its ad-free existence, Netflix doesn't play the scripted content game quite like
the television networks do.
Their revenue stream comes from subscribers, so writers of its original shows and movies
have a greater degree of flexibility when it comes to length and narrative arc structures.
Whereas a show episode on cable might have to factor in commercial breaks and chop up
the storyline accordingly, Netflix shows run uninterrupted.
And not only do showrunners have more creative control as a result, but Netflix's subscriber
data helps them to know in advance which series have the best chances of succeeding.
For example, with House of Cards, Netflix had no qualms about giving director David
Fincher approximately $4 million per episode because they had data to prove that users
loved the original British series.
And since their shows don't necessarily live and die by their viewership ratings, Netflix
alone gets to make the call whether to continue that prestige series that's getting them on
the Emmys map but might not draw every eye in the nation all at once.
Piracy prevention
In addition to tracking which shows its customers watch and how often they press pause, Netflix
also has analysts track what stingy people are torrenting on the web.
Like the data it collects from subscribers, piracy figures represent an invaluable insight
into viewing habits that Netflix uses to adjust its own programming.
After all, if people are willing to risk infecting their computer with a virus to watch Game
of Thrones, it probably means someone is willing to pay a few dollars to watch a similar show
from the comfort of their toilet.
Netflix has even been reported to use the geographical data of pirates to adjust its
pricing, lowering the cost of their service in areas with high rates of piracy in an attempt
to lure viewers over to the SS Netflix.
It might not be enough to bring ashore every swashbuckler on the web...
"A great pirate does not require such intricacy."
But it's certainly some solid reasoning.
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