Netflix’s recipe for success includes ‘secret sauce’ spiced with Silicon Valley savvy

LOS GATOS, California — Even though it’s a video streaming service shines with a Hollywood glow, Netflix still has its roots in Silicon Valley to stay one step ahead of traditional TV and film studios.

The Los Gatos, California-based company, located more than 300 miles from Hollywood, often reaches into its technological toolbox without viewers even realizing it. It often uses just a few subtle twists of viewer recommendation buttons to maintain its 270 million worldwide subscribers satisfied at a time when most of its streaming rivals are seeing waves of cancellations from inflation-weary subscribers.

Even when it comes to TV series “The crown” or “Bridgerton” Although it has broad appeal, Netflix is ​​still trying to cater to the diverse tastes of its vast audience. Part of that recipe involves tailoring recaps and trailers across the range of shows to suit each viewer’s personal interests.

So someone who enjoys romance might see a plot synopsis or video trailer for ‘The Crown’ that highlights the relationship between the two Princess Diana and Charleswhile another viewer more interested in political intrigue will see a clip of Queen Elizabeth meeting with Margaret Thatcher.

For an Oscar-nominated film like “Nyad,” an action fan might see a trailer of the title character submerged in water during one of her epic swims, while a comedy fan might see a light-hearted scene with some funny banter between the two stars, Annette Bening and Jodie Foster.

Netflix is ​​able to create these variations because of the deep insight into viewing habits it gains from collecting data from subscribers’ histories with its service – including that of customers who signed up in the late 1990s when the company launched a DVD-by-mail service that continued to function until last September.

“It’s definitely a secret sauce for us,” Netflix Chief Product Officer Eunice Kim said as she discussed the nuances of the ways Netflix tries to convince different viewers to watch different shows. “The North Star we have every day is keeping people engaged, but also making sure they are incredibly satisfied with their viewing experiences.”

As part of that effort, Netflix is ​​introducing a new homepage design that greets subscribers when they view the streaming service on a TV screen. The changes are intended to package any information that might appeal to a subscriber’s tastes into a more concise format to reduce the “gymnastics with their eyes,” said Patrick Flemming, Netflix’s senior director of member product.

What Netflix does with its previews may seem like a small thing, but it can make a big difference, especially as people looking to save money start to winnow the number of streaming services they have.

Last year, video streaming services collectively canceled approximately 140 million accounts, a 35% increase from 2022 and nearly three times as many as in 2020, when the COVID-19 pandemic created a surge in demand for entertainment from people cooped up at home . according to numbers compiled by research agency Antenna.

Netflix doesn’t disclose its cancellation or churn rates, but last year its streaming service added 30 million subscribers — marking the second-largest annual increase after its own growth spurt during the 2020 pandemic lockdowns.

Some of last year’s subscription growth continued from repression about viewers poaching Netflix subscribers who shared their account passwords. But the company also benefits from technological know-how that helps it direct shows to customers who like them and make them think the service is worth the money, said J. Christopher Hamilton, assistant professor of television, radio and television . film at Syracuse University.

“What they’ve done is quite ingenious and very, very strategic,” Hamilton said. “They are definitely ahead of the traditional media companies that are trying to do some of the same things but just don’t have the level of sophistication, experience or history of the data in their archives.”

Netflix’s nerdy legacy was once mocked by an entertainment industry that looked down on the company’s nerddom.

“It’s a bit like asking: will the Albanian army take over the world?” former Time Warner CEO Jeff Bewkes said of Netflix during a 2010 interview after being asked about the threat Netflix posed at the time.

Not long after, Netflix began mining its viewing data to figure out how to produce a slate of original programming that would attract more subscribers — an ambitious expansion that forced Time warning (now merged into Warner Bros. Discovery) and other long-standing entertainment companies such as Walt Disney Co. in a mad scramble to build their own streaming services.

While these expansions initially attracted hordes of subscribers, they also resulted in massive losses that have resulted in management shakeups and drastic budget cuts, including the abrupt closure of a CNN streaming service.

What Netflix is ​​doing with technology to retain subscribers and thus grow its fortunes (the company’s profits rose 20% last year to $5.4 billion) is now widening the divide, with rival services still trying to pare their losses.

Disney’s four-year-old streaming service recently became profitable after an overhaul by CEO Bob Igerbut he thinks more work will be needed to catch up with Netflix.

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

Netflix isn’t going to help its rivals by giving away its secrets, but the slicing and dicing generally starts with gaining insight into which viewers tend to gravitate towards certain genres – the broad categories include action, adventure, anime, fantasy, drama, horror, comedy, romance and documentary – and dive deeper from there.

In some cases, Netflix’s technology will even attempt to determine a viewer’s mood at a given moment by analyzing which titles are being viewed or clicked on. In other cases, it’s relatively easy for the technology to figure out how to make a movie or TV show as compelling as possible for specific viewers. If Netflix’s data shows that a subscriber has been watching a lot of Hindi productions, it would almost be a no-brainer to show clips of Bollywood actress Alia Bhatt in a role she played in the American film ‘Heart of Stone ‘ instead of starring in the film. actress Gal Gadot.

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