CASE STUDY: NETFLIX

Members:
Ducog, Andreagail

Gutierrez, Angelique Jowin

Loste, Sead Antoine
Ocampo, Erin Samantha

Tizon, Zhane Ann

Date: December 5, 2020

Background / History of the enterprise

Netflix is an American streaming media service and production company that is based in

Los Gatos, California. Its founders are two serial entrepreneurs, who are Marc Radolph and Reed

Hastings in the year of 1997 around August. Reed Hastings, the co-founder of Netflix, also

invented Pure Software in 1991 that makes tools for software developers. On the other hand, Marc

Radolph is a former Silicon Valley entrepreneur, advisor, and investor. He focused more on the

service that Netflix can provide to its subscribers. He also laid his work on being one of board

directors of Netflix until he retired in 2003. The invention of this platform involves the creation of

original programming. During its first year, Netflix is known to be a movie rental, wherein people

order movies and they receive DVDs at their places. Then, after people watched the movies, they

send it back in a provided envelope to Netflix. As of today, there are more than 151million

subscribers in over 190 countries in the whole world that enjoys various range of movies,

documentaries or TV series in different genres. People could access the wide range of films with

the use of the Internet through their own gadgets such as phones, laptops or TV. Furthermore, the

meaning behind Netflix is that it came from “Net”, which means internet, and “flix”, which is the

abbreviated form of movie and film.

The making of Netflix started when Randolph was a marketing director for Hasting’s

company Pure Atria. Hasting would sell Pure Atria to Rational Software Corporation in the year

of 1997 with the amount of $700 million. But both Randolph and Hastings came up with the idea

of creating Netflix during their commute while going home. In order to start their idea,Hastings

said that he would invest $2.5 million to create Netflix. The two explore and research various items

in Amazon that could be sold through the Internet. They chose DVDs over VHS cassettes since it
would fit into the generation’s fashion. Their first trial was when they posted their DVDs at their

own city and it resulted in the perfect way. Thus, they started to break into the internet market their

idea of the very first online DVD rental.

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

Out of thousand streaming channels, according to Frost (2020), the most on-demand and

successful in the making who offers streaming services globally is Netflix who generated a total

revenue of 6.44 billion US Dollars from 2011 up to the current year as illustrated in figure 1. The

popularity of Netflix arises during late 2017, wherein they garnered 151 million subscribers

around the world (see figure 1). The steppingstone behind Netflix's excellence is their data

analytics because of their satisfactory response to fulfill the desire of their subscribers. Their

success relates to the study of data science under the data application operated by analytics

engineers and visualization engineers under Data Engineering in the analytics venture.

Figure 1. Netflix’s Revenue

From different data applications, this study lies under machine learning in which the

application or a machine is designated by data scientists to function depending on the existing data
that allows the machine to learn from it based on acquired and generation of algorithms. Not only

limited with that, but Netflix also has the capability of maintaining their victory in data collection

and storage for tracing down the actions done by their subscribers prioritizing their business goals.

However, they also experienced downfalls in the flight of their success in which data engineers

managed to work on them through improving and anticipating how they would reliably serve their

customers with their high quality services in line with their demands. With that, it gives way to the

importance of data analytics in the business industry especially in decision-making and problem

solving.

Steps done by the Analytics team based on the Analytics lifecycle

The Analytics Lifecycle consists of the following steps: discovery, data preparation, model

planning, model building, communicate results, and operationalize. Based on the story of Netflix,

their discovery started from making use of big data and analytics. They know how the industry

works which is of great benefit for this business. They have set out a clear goal right from the

beginning. They have also clearly identified their resources. Netflix collects data from their

subscribers and thus, they know the important details like the time and date that they watched the

shows. They know when the show is paused and when it is resumed. They know the gender and

age of their subscribers which actually helps them in planning what shows to endorse based on

this information. They also have the responses from their subscribers through ratings and feedback.

The data collected obviously went under the process of data conditioning where they tidy up the

data. It is very evident by how they are marketing their shows and based on the shows they release

as it is based on the preferences of their customers. As we all know, they have the ‘recommended

for you’ tab to choose from. Through this method, they have ensured that people will remain

subscribed to them. They have cleared out problems through the help of the interaction with their
clients. Clearly, in communicating the results there is an observed success on their approach. In

operationalization, it is clear that their goal is achieved, and their resources are maximized. The

cycle continues that is why today they are deemed successful for having over a hundred million

active accounts subscribed to them.

Methods / resources used by the team

Unlike other popular video streaming platforms like YouTube, Netflix is dependent only

on the funds they collect from customers availing their service because they have no ads. This

means that the resources are determined by the number of individuals that pay for the subscription

fee to their service. This also means that they must focus on getting more subscribers while keeping

those who have already subscribed happy with the service in order to prolong their subscription.

Netflix utilizes as much data as they can take from what the users provide both explicitly and

implicitly. They get data as simple as the user's age, gender, location, set preferences, ratings, as

well as more subtle ones like the time of day they watch films, what genres they often view, what

trailers are being played, and the time spent searching for shows. With these data and through a

machine learning approach, Netflix developed models that analyze user activity in order to

categorize films and shows that will be of interest to the user based on their activity, and present

them in a way that would pique their interest further.

Netflix created a model that predicts which movies an individual user will most likely

enjoy. This takes in the form of the many types of genres that Netflix presents to their subscribers

depending on which cluster they are assigned to, a result of data-driven categorization. The

enterprise formulated many ways, specifically 76,897 ways, of describing films that would make

it easier to relate with the user's interests using the data that they collect from closely monitoring
the customers usage of the service. They also create personalized thumbnails or cover images to

show the suggestion, having similarities in style with other successful and popular shows, to make

it more appealing for the user to check and watch. Netflix is entirely dependent on the longevity

and quantity of people that avail their service, without external factors like ads for funds, it only

makes sense that the company will pay close attention to what their customers enjoy and give it to

them accordingly.

Results

Netflix was and is still triumphant in maintaining their reputation as one of the best

streaming platforms present. They have done so well that many have chosen to prefer Netflix over

traditional TV broadcast. Unlike in the TV industry where there is a strictly scheduled broadcast

and it is rigid in a sense that if you miss the time for the show you wish to view, you have little to

no hope of watching the episode or show you missed, Netflix allows their users flexibility and

freedom on when they can view films and which films they can watch. Not only does Netflix

provide their users with unrestricted access to the films and shows that they like, they also find

ways for users to keep on using the platform through constant suggestion of other videos that are

in line with their interests. This strategy of using data science to determine patterns within each

individual user's viewing preferences paved the way for Netflix' most successful features.

Netflix is known for its user-friendly interface that benefits not only new subscribers but

also those who availed the service for longer periods of time. The feature that allows for the

reliance of Netflix mainly on subscriptions and not on ads is the categorization of films that are

presented to their subscribers. Unbeknownst to the subscribers of Netflix, the company finds great

importance to every bit of detail that the users provide for them, this extreme consideration to
minute elements birthed a feature that is very well received by the users. The ease in which the

user is able to view shows that are currently popular, shows that are soon to be aired, and many

shows that coincide with their preferences based on the previous shows they have watched entices

many to use the platform and keep on availing the service. This is one of the reasons behind Netflix

undeniable success as it is still the leading streaming service over countless competitors.
REFERENCES

Frost, B. (2020, October 30). Best TV Streaming Services of 2020: Live and On Demand [Web

log post]. Retrieved 2020, from https://www.cabletv.com/blog/best-streaming-services

Jackman, M., & Reddy, M. (2020, September 19). Analytics at Netflix: Who We Are and What

We Do [Web log post]. Retrieved 2020, from https://netflixtechblog.com/analytics-at-netflix-who-

we-are-and-what-we-do-7d9c08fe6965

McFadden, C. (2020, July 04). The Fascinating History of Netflix. Retrieved December 05, 2020,

from https://interestingengineering.com/the-fascinating-history-of-netflix

Watson, A. (2020, October 21). Revenue generated by Netflix from 1st quarter 2011 to 3rd quarter

2020. Retrieved 2020, from https://www.statista.com/statistics/273883/netflixs-quarterly-

revenue/