Yes Yes These Are Good

wired 10.12: the netflix effect<blockquote>Netflix doesn’t just deliver DVDs, it tells subscribers which ones they’ll probably like, thanks to the Netflix recommendation engine -- a combination of 29,000 unique lines of code and a database of 180 million film ratings known as CineMatch. It’s based on the assumption that movie viewers all watch the same narrow range of big-budget films only because they don’t know any better.

When it comes to mainstream movies, huge billboards and expensive TV spots are the most efficient way to drive the masses to theaters. With off-center movies, studios spend almost nothing on promotion; mass marketing is too pricey, so they just put the film out there and hope for the best. Indie films, meanwhile, often get lost in the noise. The rental market only reinforces this pattern: The hits get promoted while the smaller films are ignored. The average video store generates 80 percent of rental activity from 200 titles. It’s called Blockbuster for a reason.

CineMatch doesn’t focus on the mass market; it caters to the individual. Netflix encourages subscribers to rate the movies they’ve viewed, and CineMatch recommends titles similar to those well liked -- regardless of a film’s popularity at the box office. As a result, the average renter expands his or her tastes. Seventy percent of the movies Netflix customers rent are recommended to them on the site; 80 percent of rental activity comes from 2,000 titles. This decreases demand for popular new releases, which is good for Netflix, whose revenue-sharing agreements require larger payouts for such films.

Such customization is foreign to Blockbuster, which has a massive database of rental data and no idea which films customers enjoy. But the concept is hardly unique…CineMatch may not be as ambitious or as well-executed as Amazon’s engine, but it’s more effective, because customers are more likely to accept the suggestions. Amazon’s tool has the feel of a slick Circuit City salesman engaged in the hard sell. On Netflix, the recommendations are included in the cost of a subscription, making CineMatch seem more like the geeky clerk at a small video store. He sets aside titles he knows you’ll like and tells you to return them whenever.

…Today’s Hollywood produces films for Middle America. If our tastes truly are so homogenous, then Walmart.com and Blockbuster, which have flourished by catering to the masses, should topple Netflix. But if Middle America has been a caricature -- a market of convenience -- all along, then CineMatch could be a real weapon.</blockquote>I finally was reading this issue of Wired last night and was like YES. This is it. This is Integration Research. Not the business plan, not providing a service, but the innovation in distribution and education–YES.