Founded by Reed Hastings and Marc Randolph in 1997, Netflix commenced its business as a subscription-based DVD rental company. The idea behind Netflix, as framed by Hastings and Randolph, was to create an e-commerce platform like Amazon, but exclusively for movies. Customers would buy the subscription, wishlist the movies for rental, and get the DVD delivered to their doors in about one business day. Under the monthly subscription plan, users could watch as many movies as they wanted.
From this initial idea of a DVD rental business, Netflix has transformed into a multi-billion dollar streaming platform with a global presence. The onset of the 21st century witnessed a rise in high-speed internet and a subsequent drop in costs. These advancements in technology boosted the video-on-demand (VOD) market in the 2000s, and Netflix was the first to seize this opportunity.
Initially, Netflix planned an analog approach to replace DVD rentals. They focused on developing a portable device that would download movies for users to watch later. Despite offering quality, this method reduced user convenience and was ultimately terminated. Eventually, Netflix transitioned towards developing a direct streaming platform in 2005, and within two years, the product was ready.
From offering only a thousand movies for streaming in 2007, Netflix expanded to over 10,000 titles within the next two years. The rise in popularity of video-on-demand (VOD) catalyzed Netflix’s growth outside of the United States. By 2016, Netflix had conquered the global market, with its subscriber count surpassing 100 million by the end of 2017.
Digital Transformation of Netflix
By the late 2000s, Netflix had secured a significant market cap in the media and entertainment industry. The digital transformation of Netflix disrupted the market and established a new and more efficient order. This was fueled as high-speed internet became more widespread and Web 2.0 incentivized ease of use and end-user interoperability. Let’s take a closer look at the initiatives Netflix took to digitally transform itself.
Netflix Recommendation Algorithm
As a snail-mail DVD rental platform, Netflix had already deployed a recommendation system called Cinematch to enhance customer engagement and keep the movie request queue thriving. However, the transition to direct streaming required a revamp of the recommendation algorithm. The new objectives were to make the streaming platform more captivating and enhance the accuracy of movie recommendations. Here’s how Netflix reformed its recommendation algorithm:
Availability of Cache Data: The streaming platform left behind lots of cache data that was accessed to improve the algorithm. This data, both explicit (likes and wishlist options) and implicit (user behavior), was extrapolated into recommendations.
Metadata Implementation: All content on the streaming platform was assigned distinctive metadata. The metadata from the collected cache was used to compile identical metadata for other movies. For instance, the metadata could be categorized by genre, such as thriller or romance, or by actors. Based on this, movies with similar components were recommended.
A/B Tests: Netflix goes the extra mile to improve customer experience through A/B tests, which manually evaluate how users interact with content. Netflix selects a random set of users, divides them into groups A and B, and monitors their behavior with different layouts. The layout with more interaction is then implemented across the platform.
Integration With Amazon Web Services (AWS)
Netflix chose Amazon’s cloud services (AWS) as its computing platform for several reasons. From its website and software applications to its recommendation algorithm and A/B testing infrastructure, everything runs on AWS. Even its datasets are stored on AWS. The reasons include:
Opting for an External Entity for Data Synchronization: Netflix’s immense growth demanded constant scalability. To focus on the front end, Netflix handed over its database architecture management to Amazon.
Innovation and Business Improvement: By outsourcing data center management to Amazon, Netflix could focus solely on innovation and product development.
Better Horizontal Scaling and Predictability: Netflix can instantly access usage statistics and predictions through Amazon AWS, allowing it to adjust business targets accordingly.
Futuristic Applications Through Cloud Computing: Netflix prioritizes innovation and bets on cloud computing as a revolutionary technology.
Defining UI Design With AI Integration
Netflix leverages the power of artificial intelligence (AI) in its systems, especially in user interface design. The generation of movie thumbnails and further personalization is managed by AI tools. AI analyzes thousands of frames from a movie and ranks them from the most clickable to the least.
These rankings are based on analytical data from other users’ clicks. For example, thumbnails can be based on users’ preferences for a particular actor, genre, or specific scene.
Features of a Video Streaming App Like Netflix
Netflix’s popularity is also attributed to its excellent software and mobile app platforms. The features provided on these platforms enhance customer satisfaction and experience. Let’s take a detailed look at these features:
Multiple Profiles: A single subscription plan allows users to create multiple profiles, retaining and saving their watch behavior. This enables appropriate recommendations for each profile.
Downloads: To enable users to watch movies or TV series on the go, Netflix allows downloads for offline viewing, especially useful in remote locations with low connectivity.
Search Feature: Users can manually search for movies and TV series on the platform.
Different Subscription Models: Netflix offers various subscription models to cater to a wide range of users and expand its target audience across different regions.
Parental Control: Netflix provides kid-only profile access and allows parents to set security locks on mature content.
Conclusion
Netflix’s journey from a DVD rental service to a global streaming giant is a testament to its ability to innovate and adapt to changing market conditions. By embracing digital transformation, leveraging AI, and focusing on customer experience, Netflix has established itself as a leader in the media and entertainment industry. As technology continues to evolve, Netflix remains at the forefront, continuously redefining how we consume content.