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

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LOS GATOS, Calif. (AP) — Although its streaming video service has a Hollywood sheen, Netflix is ​​still tapping into its Silicon Valley roots to stay one step ahead of traditional TV and movie studios.

The Los Gatos, Calif., company, which is based more than 300 miles from Hollywood, often reaches into its technology toolbox without viewers even realizing it. It often uses just a few subtle twists on its viewer recommendation handles to help keep its 270 million subscribers around the world happy at a time when most of its streaming competitors are seeing waves of cancellations from subscribers fed up with inflation.

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Even when hit TV series like “The Crown” or “Bridgerton” have broad appeal, Netflix still tries to cater to the disparate tastes of its broad audience. One part of this recipe involves tailoring synopses and trailers around a variety of shows to suit each viewer's personal interests.

So someone who loves romance might see a synopsis or video of “The Crown” highlighting the relationship between Princess Diana and Charles, while another viewer more interested in political intrigue might see a clip of Queen Elizabeth meeting with Margaret Thatcher.

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

Netflix can capitalize on these differences through a deep understanding of viewing habits that it gleans from analyzing data from subscriber records with its service — including customers who signed up in the late 1990s when the company launched the DVD-by-mail service that continued to operate until last September. .

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“It's definitely a secret sauce for us,” said Eunice Kim, chief product officer at Netflix, while discussing the nuances of the ways Netflix tries to get different viewers to watch different shows. “The North Star that we have every day is to keep people engaged, but also to make sure that they are incredibly satisfied with their viewing experiences.”

As part of this effort, Netflix is ​​rolling out a redesign of the home page that welcomes subscribers when they watch the streaming service on TV. The changes are aimed at compiling all the information that might appeal to subscribers' tastes in a more concise format to reduce “eye gymnastics,” said Patrick Fleming, Netflix's senior director of member products.

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 become aware of how many streaming services they have available.

Last year, video streaming services collectively suffered about 140 million account cancellations, a 35% increase from 2022 and nearly three times the size in 2020, when the COVID-19 pandemic created a surge in demand for entertainment from people stuck at home. , according to the numbers. Compiled by Antenna Research Corporation.

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Netflix has not disclosed its cancellation rate, but its streaming service last year gained 30 million subscribers, marking its second-largest annual increase after its growth spurt during the 2020 pandemic lockdowns.

Part of the growth in subscriptions last year stemmed from a crackdown on viewers who were preying on Netflix subscribers who shared their account passwords. But the company also benefits from technological know-how that helps it continue to target programming to customers who like it and make them think the service is worth the money, according to J. Christopher Hamilton, assistant professor of television, radio and TV. Film at Syracuse University.

“What they were doing was very ingenious and very strategic,” Hamilton said. “They're definitely ahead of legacy media companies that are trying to do some of the same things but don't have the level of sophistication, experience and history of data that they have in their archives.”

The entertainment industry once mocked Netflix's geek legacy by looking down on the company's geekiness.

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“It's kind of like, 'Is the Albanian army going to take over the world?' Jeff Bewkes, former CEO of Time Warner, said about Netflix during a 2010 interview after being asked about the threat Netflix posed at the time.

Shortly after that rejection, Netflix began mining its viewership data to figure out how to produce a slate of original programming that would attract more subscribers — an ambitious expansion that forced Time Warner (now morphed into Warner Bros. Discovery) and others… Long-form programming Incumbent entertainment companies like Walt Disney have begun a mad scramble to build their own streaming services.

Although these expansions initially attracted hordes of subscribers, they also led to huge losses that led to management changes and drastic cutbacks, including the abrupt closure of CNN's live streaming service.

What Netflix is ​​doing with technology to retain subscribers to boost its fortunes — the company's profits rose 20% to $5.4 billion last year — is now widening the gap with rival services that are still trying to stem their losses.

Disney's 4-year-old streaming service recently became profitable after an overhaul engineered by CEO Bob Iger, but he believes more work will be needed to catch up with Netflix.

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

Netflix won't help its competitors by revealing its secrets, but its slicing and slicing process generally starts with learning what genres viewers tend to gravitate to — broad categories include action, adventure, anime, fantasy, drama, and horror. Comedies, romances, and documentaries — then dive deeper from there.

In some cases, Netflix's technology will attempt to predict a viewer's mood at any given time by analyzing titles being browsed or clicked on. In other cases, it's relatively easy for technology to figure out how to make a movie or TV series as engaging as possible for specific viewers. If Netflix data shows that the subscriber has watched a lot of Indian productions, it would be almost illogical to show clips of Bollywood actress Alia Bhatt in the role she played in the American film “Heart of Stone” instead of the main film. Actress Gal Gadot.

“We want to do a really good job of putting your favorite things in front of you,” Kim said. “Part of that is the content recommendations themselves, but it's also about how the content is presented to you.”

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