1

TABLE OF CONTENT

List of figures…………………………………………………………………………………….2
Executive summary…………………………………………………...………………………….3
1.0 Introduction………………………………………………………….……………………….3
1.1 Company overview………………………………………………….…………………….4
1.2 Industry background ………………………………………………….…………………..5
2.0 Netflix Vs Blockbuster………………………………………………………………………6
3.0 Netflix recommendations system……………………………………………………………7
3.1 Content-based and Collaborative filtering………………………………………………..8
3.2 Hybrid recommendation System ……………………………………..…………………..9
3.4 Use of data on Netflix recommendations…………………………………………………9
3.5 How Netflix used user data to create the best of tv shows……………………………….10
4.0 Netflix and rising competition from business intelligence………………….………………12
4.1 Issues with the use BI based recommendation systems……………………………..…….13
5.0 Netflix-industry and organizational analysis………………………………..……………….14
5.1 SWOT analysis…………………………………………………………………………….14
5.2 PESTEL analysis…………………………………………………….…………………….15
5.3 Recommendations…………………………………………………………………………17
6.0 Conclusion………………………………………………………………………..………….18
References…………………………………………………………………………………………………..19
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List of figures

Figure 01: Netflix’s vision and mission statement…………………………….……………..4

Figure 02: Top subscription services (2020)............................................................................5
Figure 03: Rise of Netflix…………………………………………………….……….……..6
Figure 04: Data used as input data for a recommender system……………….……………..7
Figure 05: Collaborative and content based recommendations……………….……………..8
Figure 06: Hybrid Recommendation System ……………………………….….……………9
Figure 07:Netflix tracking items……………………………………………….……………10
Figure 08: Number of primetime Emmy awards (2013 - 2022)-nominations /wins for Netflix
content……………………………………………………………………………………….11
Figure 09: market leaders on SVoD market………………………………………….……..12
Figure 10: SWOT analysis on Netflix………………………………………………………14
Figure 11: PESTEL analysis on Netflix…………………………………………………….16
Figure 12: Recommendations for Netflix…………………………………………………...17
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Executive summary

One of the biggest providers of online streaming media is Netflix. In 1997,. The headquarters of
the company are in Los Gatos, California. DVDs were initially offered for purchase or rental by
Netflix. Video on demand became its new business model during the time when internet users
increased and DVD sales and rental services declined. It began making its own original TV
shows and films in 2012. Business intelligence are used by Netflix to better understand its
consumer base. They can provide the customer a better service or product by utilising their data.
.Large volumes of data are gathered by Netflix from a diverse subscriber base. It gathers
information about a user's location, the content they watch, their interests, the information they
search for, and the time they watch it. Its system generates a personalized recommendation
depending on the user's interests based on these characteristics. The Netflix business model has
changed from DVD rental to video on demand, and it is actively generating original series in
response to the shifting demands of the market. In this report, we examine Netlix use of business
intelligence to improve subscriber experiences, become more customer-centric, and grow its user
base is also examined in this paper. We have offered some suggestions that Netflix can use as
part of its business strategy based on the SWOT and PESTLE analyses.
 4

1.0 Introduction

1.1 Company overview

Netflix, the largest subscription-based Internet television network in the world, offers
personalized on-demand streaming media services to more than 222 million paying subscribers
in more than 190 countries. Established in 1997 and with its headquarters in Los Gatos,
California, the company generated an annual revenue of $29.698 billion for the year 2021
(Netflix, Inc., 2022). Netflix operates in the entertainment sector. more precisely, the industry for
subscription video on demand. The largest SVoD market share belongs to Netflix at 25%, but its
rivals have been gradually expanding as Netflix has been experiencing quarterly membership
declines (Espósito, 2022).Initial days brought about significant losses for Netflix. however,
switched from a traditional DVD rental and sales strategy to an online video streaming service in
2007 as the number of internet users increased. Netflix was able to lessen the loss as a result
(Maddodi & Prasad, 2019).

Figure 01: Netflix’s vision and mission statement

Source: (Stories move us.they make us feel more emotion, see new perspectives, and bring us
closer to each other. 2022)
 5

1.2 Industry background

More than 84% of American consumers say they subscribe to at least one subscription service.
Netflix is the streaming entertainment service subscribed to most by consumers. Disney+ is the
fourth most-subscribed streaming service, beating out the likes of YouTube TV and HBO
Now/HBO Go. 6 in 10 US consumers surveyed by InMyArea subscribe to Amazon Prime,
making shopping a leader in non-entertainment subscription services. One-fifth (22%) of
consumers say they do not subscribe to any of these types of services. 8 in 10 (79%) of those
who subscribe say they use all or most of the services they pay for (Lashbrook, 2020) . Figure 02
provides a market overview of the SVoD market as 0f 2020.

Figure 02: Top subscription services (2020)

Source: (Lashbrook, 2020)
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2.0 Netflix Vs Blockbuster

The revolutionary idea of renting and buying DVDs online was created by Netflix. Its website's
inventory must be used to choose the movies or TV shows required, and the service will then
mail the DVD to you. When Netflix first launched, it offered DVDs for rent. Netflix found that it
was losing money when it comes to DVD rentals since it was paying more per customer than it
was earning. As a result, it changed to a subscription-based business model, offering DVD
rentals to customers who made a predetermined payment. Comparatively to more seasoned DVD
rental companies like Blockbuster, the demand for new movies decreased by 20% once Netflix
launched its Netflix recommendation system. Both Netflix and Blockbuster served the same
market, but their business approaches were different. The foundation of Blockbuster's business
model was the idea that most movie rentals were made on impulse by consumers, hence their
outlets were primarily focused on that aspect. The idea of watching movies as routine
entertainment served as the cornerstone of the Netflix business plan (1985 - 2017).

Figure 03: Rise of Netflix

Source: ( The Rise of Netflix (and the Fall of Blockbuster))
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3.0 Netflix recommendations system.

Netflix was one of the early adopters of business intelligence in the year 2006 (Bell & Koren,
2007). Netflix's recommendation systems are based on big data analytics and data science
(Resnick & Varian, 1997). It recommends the subscribers various choices based on their
interests.

Figure 04: Data used as input data for a recommender system

Source: (Falk)

The recommendation systems use Machine learning. It takes input from the user and
recommends accordingly. The Netflix Recommendation system collects user data from the user
and based on those data its algorithm gives a personalized recommendation based on the
subscriber’s interest (Netflix) (Gomez-Uribe & Hunt, 2016).
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3.1 Content-based and Collaborative filtering.

There are two types of recommendation systems; Content-based, Collaborative filtering

(Adomavicius & Tuzhilin, 2005).

Figure 05: Collaborative and content based recommendations

Source: (Bouvier, 2021)

Content-based filtering: This type of recommendation system is based on the history of the
subscriber. The Subscriber will watch content or movies of a kind like action or comedy again if
he has viewed a similar content in the past. This type of recommendation system takes the
customer information . Initially when any subscriber has just joined the service it asks the
subscriber to provide the information like which genre he likes and some other information
(Balabanović & Shoham, 1997).

Collaborative filtering: This style of recommendation system is based on users' profiles that are
similar to one another. For example, if subscriber A like crime, action, and horror films while
subscriber B enjoys crime, action, and comedy films, then subscriber A will choose comedy
films while subscriber B will prefer horror films (Balabanović & Shoham, 1997).
 9

3.2 Hybrid Recommendation System

Hybrid Recommendation System utilizes collaborative filtering combined with content-based

filtering in relation to online recommendation systems. In this recommendation system, a
recommendation is generated based on the subscriber's watching and searching patterns as well
as their prior browsing behavior.

Figure 06: Hybrid Recommendation System

Source: Author developed

3.4 Use of data on Netflix recommendations

Netflix gathers a large amount of information from its user base in order to offer individualized
recommendations to its users. Some of the items that Netflix tracks are mentioned below on
figure 07.
 10

Figure 07:Netflix tracking items

Source:(Ohio University, 2022)

3.5 How Netflix used user data to create the best of tv shows

Netflix sought to transition from streaming material from third parties to a platform for
producing and distributing content. They believed that by utilizing strategic business intelligence
techniques, they would be able to successfully develop a popular show in the studio before
making it available for review. The bulk of the show's intended audience had a strong collective
respect for Kevin Spacey, an Emmy Award-winning actor best known for playing a treacherous
and repulsive persona. The same type of watcher also carefully watched The Social Network
director David Fincher. Finally, intelligence models recommended the well-known British series
House of Cards to Netflix (which had been largely forgotten). The now hugely popular Netflix
series was made by combining those three major ideas. The streaming content provider was able
to create a compelling new show utilizing business intelligence while avoiding many of the
trial-and-error procedures that show runners frequently go through (Sapot, 2018). The premiere
 11

of their first television program, "House of Cards," which they predicted would be a success
through data analysis, demonstrates how useful big data analytics has been for them. Likewise
over the years Netflix has been able to secure more Emmy wins by their use of Business
intelligence in content creation. Figure 07, illustrates the number of Emmy wins and nominations
Netlix has got over the years (2013 -2022).

Figure 08: Number of primetime Emmy awards (2013 - 2022)-nominations /wins for Netflix
content
Source: (Stoll, 2022)
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4.0 Netflix and rising competition from business intelligence

With the rise and use of BI for recommendation systems, other organizations started to capitalize
on home entertainment over the Internet. During the past 15 years, a number of businesses have
entered the direct-to-consumer sector, with varied degrees of success. Vulture reports that there
are 43 large and minor subscription services for streaming as of May 2020 (Lamare, 2020).
Although Netflix remains by far the most prominent provider, its market share is decreasing.
Netflix accounted for 64.6% of demand two years ago. In the United States, where Netflix
accounted for 48.1% of demand—the first time it has ever fallen below 50%—the decline is even
more pronounced. Previously one of only a few companies in its industry, Netflix today faces
competition from Amazon, Hulu, Disney+, HBO Max, Peacock, Apple TV+, Paramount, and
Discovery+. The top shows for the first quarter are listed below. Seven of the ten are
Netflix-related, but Disney+ and Amazon also have entries (Shaw, 2021).

Figure 09: market leaders on SVoD market.

Source:(Shaw, 2021)
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4.1 Issues with the use BI based recommendation systems.

● Cold-Start: When a new subscriber first joins, there isn't enough data to provide
recommendations.
● Scalability is important because there are so many users and contents. To deliver correct
recommendations in the quickest amount of time, a significant amount of computer
power is required.
● Data Sparsity: Due to the size of the database, only a small number of items may have
received ratings from the most active users.
● Accuracy: This is one of the main restrictions because it has to do with how well the
recommendation system can forecast what a user wants.
● Diversity: Preventing bias is made easier by this. A wide range of recommendations
ought to be readily available.

(Maddodi & Prasad, 2019).

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5.0 Netflix-Industry and organizational analysis

5.1 SWOT analysis

A SWOT analysis assesses the internal and external possibilities and dangers in the environment
of an organization, as well as its strengths and weaknesses (Bonnici & Galea, 2015).
 15

Figure 10: SWOT analysis on Netflix

Source: author developed

5.2 PESTEL analysis

PESTEL analysis is a framework or tool used by marketers to analyze and track the
macro-environmental (external marketing environment) aspects that have an impact on an
organization. PESTELE is a more current name for this framework or methodology (professional
academy, 2018)
16
 17

Figure 11: PESTEL analysis on Netflix

Source: author developed

5.3 Recommendations
The Netflix SWOT and PESTEL analyses illustrate the brand's present position and the risks it is
currently up against. Here are a few recommendations for Netflix that were made following this
thorough investigation.

Figure 12: Recommendations for Netflix

Source: author developed
 18

6.0 Conclusion

In this report, we've covered how Netflix managed to surpass its rival and take the top spot
among providers of internet streaming services. We've also talked about the many types of
recommendation systems, including Netflix's usage of a hybrid recommendation method and
recommendation systems based on collaborative filtering and content analysis. Additionally, we
looked at how Big Data Analytics' recommendation engine is used to enhance the user
experience. We also talked about how big data analytics helps Netflix create original content that
would be a major success by predicting the watching preferences of subscribers. Finally We have
given a few recommendations to Netflix to strengthen their company strategy based on the
SWOT and PESTLE research.
 19

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Balabanović, M. and Shoham, Y. (1997) “Fab,” Communications of the ACM, 40(3), pp.
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