How Netflix wins the streaming wars: it crunches subscribers’ data to tailor its services

So someone who likes romance might see a trailer for The Crown highlighting the relationship between Diana and Charles, while another viewer more into political intrigue may be shown a clip of the queen in a meeting with then-British prime minister Margaret Thatcher.
A still from Bridgerton. Photo: TNS
For a film like Nyad, a lover of action might see a trailer of the title character during one of her epic swims, while a comedy fan might see a scene featuring banter between the two stars, Annette Bening and Jodie Foster.

Netflix is able to pull off these variations through the deep understanding of viewing habits it gleans from crunching the data from subscribers’ histories with its service – including those of customers who signed up in the late 1990s when the company launched with a DVD-by-mail service that continued to operate until last September.

“It is a secret sauce for us, no doubt,” says Eunice Kim, Netflix’s chief product officer, while discussing the nuances of the ways Netflix tries to reel different viewers into watching different shows. “The North Star we have every day is keep people engaged, but also make sure they are incredibly satisfied with their viewing experiences.”

A still from The Crown. Photo: Netflix
As part of that effort, Netflix is rolling out a redesign of the homepage that greets subscribers when they are watching the streaming service on a television screen.

The changes are meant to package all the information that might appeal to a subscriber’s tastes in a more concise format to reduce the “gymnastics with their eyes,” says Patrick Flemming, Netflix’s senior director of member product.

What Netflix is doing may seem like a small thing, but it can make a huge difference, especially as people looking to save money cut the number of streaming services they have.

In 2023, video streaming services collectively suffered about 140 million account cancellations, a 35 per cent increase from 2022 and nearly triple the volume in 2020, when the Covid-19 pandemic created a boom in demand for entertainment from people corralled at home, according to numbers compiled by the research firm Antenna.

What they have been doing is pretty ingenious and very, very strategic

J. Christopher Hamilton, assistant professor

But the company is also benefiting from the technological know-how that helps it to keep funnelling shows to customers who like them and make them think the service is worth the money, according to J. Christopher Hamilton, an assistant professor of television, radio and film at Syracuse University in New York.

“What they have been doing is pretty ingenious and very, very strategic,” Hamilton says. “They are definitely ahead of the legacy media companies who are trying to do some of the same things but just don’t have the level of sophistication, experience nor the history of the data in their archives.”

Netflix’s nerdy heritage once was mocked by an entertainment industry that looked down at the company’s geekdom.

“It’s a little bit like, is the Albanian army going to take over the world?” former Time Warner chief executive Jeff Bewkes says of Netflix during a 2010 interview after being asked about the threat Netflix posed at the time.

Bob Iger, CEO of Walt Disney Co, thinks more work will be required to catch up with Netflix. Photo: Bloomberg
Not long after that, Netflix began mining its viewing data to figure out how to produce original programming that would attract more subscribers – an expansion that forced Time Warner (now rolled into Warner Bros Discovery) and other companies such as Walt Disney Co into a scramble to build their own streaming services.

Although those expansions initially attracted hordes of subscribers, they also resulted in massive losses that have resulted in management shake-ups and drastic cutbacks, including the abrupt closure of a CNN streaming service.

What Netflix is doing with technology to retain subscribers to boost its fortunes – the company’s profit rose 20 per cent to US$5.4 billion last year – now is widening the divide with rival services still trying to stanch their losses.

Disney+ recently became profitable after an overhaul engineered by CEO Bob Iger, but he thinks more work will be required to catch up with Netflix.

“We need to be at their level in terms of technology capability,” Iger said at a conference earlier this year. “We’re now in the process of creating and developing all of that technology, and obviously the gold standard there is Netflix.”

Alia Bhatt in a still from Heart Of Stone. Photo: Netflix

Netflix is not going to help its rivals by divulging its secrets, but the slicing and dicing generally starts with getting a grasp of which viewers tend to gravitate to certain genres – the broad categories include action, adventure, anime, fantasy, drama, horror, comedy, romance and documentary – and then diving deeper from there.

In some instances, Netflix’s technology will try to divine a viewer’s mood at any given time by analysing what titles are being browsed or clicked on. In other instances, it is relatively easy for the technology to figure out how to make something as appealing as possible to specific viewers.

If Netflix’s data shows a subscriber has watched a lot of Hindi productions, it would be almost a no-brainer to feature clips of Bollywood actress Alia Bhatt in a role she played in the US film Heart of Stone instead of the movie’s lead actress, Gal Gadot.

“We want to do a really good job putting the things that you prefer in front of you,” Kim says. “Part of that is the content recommendations themselves, but it is also about how we present the content to you.”

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