Documentary Business

Peter Hamilton Consultants, Inc

Netflix: How Its Continuous Innovation Strategy Drives Programming Decisions

A senior Netflix executive recently presented his company’s strategy of continuous innovation.

It reveals how BIG DATA drives the personalization of programming decisions.

Enjoy my selection of slides from the “Innovation at Netflix” presentation! My occasional commentary is in italics.

Netflix Snapshot

  • Global Internet TV
  • Subscription service: watch any amount, at any time, on any device – no commercials
  • > 125 million members
  • > 190 countries
  • > 140 million hours watched per day
  • Enterprise Value: $160 Bn
  • Approximate headcount dedicated to Innovation: 530

  • Netflix tests and tracks how you respond to every pixel on your interface.

  • Above are several “Recommendation” tools that can be tested and personalized to best fit your preferences.

  • Continuous improvement is driven by the efficient, quantitative analysis of properly-conceived tests

  • There is one BIG metric on this slide: “Bottom line
  • Revenue for a subscription service is driven by two factors:
    • new member acquisition, and
    • retention of existing subscribers.
  • Managing and minimizing “churn” is a relentless focus of subscriber-based businesses.

  • The age-old drivers of direct-response marketing are:
    • Test, with highly controlled variables
    • Analyze the results
    • Roll out with the winners
    • Discard the losers

  • Example: A/B Testing of the UI / User Interface: Which one works for you?

More Slides on A/B Testing Follow:

Samples of Other Tests:


No “Added Value” Content

  • At Sunny Side of the Doc, Knowledge Network Canada’s Rudy Buttignol highlighted how the Netflix model resembles the old video store: It’s all about the video!
  • His Takeaway is that public television commissioners got carried away with delivering extra digital content and other ancillary stuff.
  • Rudy argued that the success of the Netflix model is a call  for broadcasters to get back to the basics.

Continuity Video

  • Netflix’s direct marketing model is very familiar to industry veterans who worked for Time /Life, CBS/Columbia House, Readers Digest and other continuity marketers.
  • These legendary publishing businesses added video to their successful print model.
  • They commissioned hugely successful, long-running series that were delivered by mail in VHS or DVD formats.
  • The big differences then and now:
    • Tests are relatively slow and costly when they involve print and postal services.
    • Netflix’s online test results are immediate.
  • During my time at CBS Enterprises, I worked on the hit continuity series “World War II with Walter Cronkite.” The margins were eye-popping


Updated August 2018

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