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International Journal of Scientific Research & Engineering Trends

Volume 9, Issue 6, Nov-Dec-2023, ISSN (Online): 2395-566X

A Study to Know - Use of AI for Personalized


Recommendation, Streaming Optimization, and Original
Content Production at Netflix
Komal Khandelwal1, Sarvanaman Patel2, Jarni Patel3, Monika Pnachal4
Finance Department, Universal Business School, Karjat, Raigad, Maharashtra 1, 4
Marketing Department, Universal Business School, Karjat, Raigad, Maharashtra 2, 3

Abstract- Netflix has become a household name in the entertainment industry due to its innovative use of data science and
artificial intelligence (AI) in its business strategy. This paper provides a comprehensive overview of how Netflix has leveraged
data science to gain a competitive edge in the industry. The paper explores how Netflix uses personalized recommendations to
enhance the user experience. Netflix's recommendation system is powered by a collaborative filtering algorithm that analyses
user data, such as viewing history and ratings, to suggest content that is likely to be of interest to the user. The recommendation
system is continuously improved through machine learning algorithms, which learn from user behaviour and preferences to
provide more accurate recommendations. The paper also discusses how Netflix uses streaming optimization to deliver high-
quality video content to its users. Netflix's AI-powered encoding system analyses each video and optimizes the encoding process
to reduce file size without compromising video quality. This enables Netflix to deliver high-quality video content with minimal
buffering time, even in areas with slow internet connectivity.

Another aspect of Netflix's success is its production of original content. Netflix uses data science to identify gaps in the market
and understand audience preferences, enabling it to produce highly engaging original content. The company uses machine
learning algorithms to analyse viewer data and identify trends and patterns that inform its content creation strategy.
However, implementing data science in the entertainment industry comes with its challenges and limitations. Netflix faces issues
such as bias in the recommendation system, privacy concerns, and the high cost of producing original content. Nevertheless,
Netflix continues to invest in data science and AI to improve its services and stay ahead of its competitors. This paper provides a
comprehensive understanding of how Netflix has implemented creative data science and AI in its business strategy to become a
leader in the entertainment industry. The paper highlights the importance of personalized recommendations, streaming
optimization, and original content production in Netflix's success. It also emphasizes the challenges and limitations of using data
science in the entertainment industry and the need for continuous improvement and innovation.

Index Terms-Netflix, Data Science, Artificial Intelligence, Personalized Recommendations, Collaborative filtering, Machine
learning algorithms, Streaming optimization, original content, Entertainment industry.

I. INTRODUCTION
This term paper explores how Netflix has utilized creative data
Netflix has revolutionized the entertainment industry by science in its business to improve its services and retain its
providing a wide range of TV shows, movies, and customers. It will analyse the various strategies and
documentaries on its platform. The company has gained technologies used by the company to collect, analyse, and
immense popularity due to its unique business model, which is utilize data to create a competitive advantage. The paper will
heavily reliant on data science. Netflix has successfully also discuss how Netflix's data-driven approach has allowed the
implemented data science and machine learning to create company to remain at the forefront of the entertainment
personalized recommendations, optimize content delivery, and industry and continuously innovate its platform.
forecast customer behaviour.

© 2023 IJSRET
1738
International Journal of Scientific Research & Engineering Trends
Volume 9, Issue 6, Nov-Dec-2023, ISSN (Online): 2395-566X

Furthermore, this paper will also highlight the challenges and companies that can effectively leverage its power are likely to
risks that Netflix faces in the implementation of data science, emerge as industry leaders.
such as data privacy and security concerns. Finally, this paper
will conclude by summarizing the impact of Netflix's data- II. LITERATURE REVIEW
driven approach on its business and its potential for future
growth and expansion. The use of Artificial Intelligence in Netflix's business strategy
has been a key factor in its success in the entertainment
1. Creative Use of Data Science in the OTT Industry industry. This section provides a review of the existing
The over-the-top (OTT) industry, which refers to the delivery literature on Netflix's use of artificial intelligence, including the
of video content over the internet, has been transformed by the various techniques and tools used by the company.
creative use of data science. By leveraging vast amounts of
customer data, OTT providers can create highly personalized One of the main ways that Netflix has implemented Artificial
user experiences that keep customers engaged and coming back Intelligence is through its personalized recommendation
for more. This has led to significant growth and innovation in system. The system uses collaborative filtering, content-based
the industry and has set a high bar for competitors to follow. filtering, and machine learning algorithms to analyse user data
and make recommendations based on their viewing history.
One of the key areas where data science is being used in the Research has shown that personalized recommendations have
OTT industry is the area of content recommendation. By significantly contributed to customer retention and satisfaction
analysing customer viewing history and behaviour, OTT (Fajardo et al., 2020; Yoon, 2016).
providers can recommend content that is highly personalized to
each user. This not only helps users find content that they are Another way that Netflix has utilized data science is through
likely to enjoy, but it also helps drive engagement and retention, streaming optimization. The company uses a combination of
as users are more likely to continue using a service if they are encoding algorithms, bitrate adaptation, and content delivery
finding content that they like. networks to ensure that users have a smooth and uninterrupted
streaming experience. Research has shown that these
Another area where data science is being used in the OTT optimization techniques have significantly reduced buffering
industry is the area of content creation. By analysing customer time and increased user engagement (Kumar et al., 2020; Sun
viewing behaviour and other data, OTT providers can identify et al., 2016).
trends and patterns that can inform the creation of new content.
For example, Netflix has used data science to identify a trend Netflix's use of data science has also been crucial in its original
in interest in true crime content, which has led to the creation content production strategy. The company uses data analysis to
of popular shows like "Making a Murderer" and "Mind hunter". identify the type of content that its users are interested in and
then produces original content based on those interests. This
In addition, data science is also being used in the OTT industry strategy has been successful in attracting and retaining
to improve the user experience. By analysing customer data, customers, as well as reducing the cost of licensing third-party
OTT providers can identify pain points in the user experience content (Kim et al., 2020; Misra et al., 2018).
and make improvements to the service. For example, Netflix
has used data science to improve the performance of its video In addition to these techniques, Netflix has also used data
streaming service by optimizing its encoding algorithms and science to conduct research and development in areas such as
reducing buffering. image and audio analysis, natural language processing, and big
data analytics (Liu et al., 2018; Zhang et al., 2019). The
However, there are also challenges associated with the use of company also ran the Netflix Prize competition, which offered
data science in the OTT industry. These include the potential a prize of $1 million for the team that could improve the
for bias in algorithms and the need to ensure the accuracy of accuracy of its recommendation system by 10% (Bell et al.,
recommendations and predictions. As the industry continues to 2009).
evolve, it will be important for companies to continue to invest
in their data science capabilities and to be mindful of these Despite the many benefits of using data science in the
challenges as they develop and deploy new algorithms and entertainment industry, there are also several challenges and
models. limitations. For example, concerns around data privacy,
Overall, the use of data science in the OTT industry has been a security, and ethics have emerged, and the accuracy and
game changer, allowing providers to create highly personalized interpretability of data models have been called into question.
user experiences that drive engagement and retention. As the These challenges must be addressed to ensure that data science
industry continues to evolve, data science will likely play an can be used effectively and responsibly in the entertainment
even greater role in driving growth and innovation, and industry. (Kumar et al., 2020; Nie et al., 2021).

© 2023 IJSRET
1739
International Journal of Scientific Research & Engineering Trends
Volume 9, Issue 6, Nov-Dec-2023, ISSN (Online): 2395-566X

Netflix uses a recommendation engine that utilizes In "Factorization Meets the Neighbourhood: a Multifaceted
collaborative filtering techniques to provide personalized Collaborative Filtering Model," Koren et al. discuss a hybrid
movie and TV show recommendations to its users. In their recommendation algorithm that combines collaborative
paper, "Collaborative Filtering for Netflix," Bell, Koren, and filtering with latent factor models. The algorithm was used in
Volinsky discuss the algorithm that Netflix uses to predict user the Netflix Prize competition and has since been adopted by
ratings and how it compares to other algorithms in terms of Netflix for its recommendation engine (Koren et al., 2008).
accuracy and efficiency (Bell, Koren, & Volinsky, 2007). Netflix uses a machine learning algorithm to personalize its
homepage for each user. In their paper, "Deep Neural Networks
In "The Netflix Prize," Bell and Koren discuss the Netflix Prize for YouTube Recommendations," Covington et al. discuss how
competition, which was launched in 2006 to improve the YouTube uses a deep neural network to personalize its
accuracy of Netflix's recommendation algorithm. The recommendations, and the authors note that Netflix uses a
competition offered a $1 million prize to anyone who could similar algorithm for its homepage (Covington et al., 2016).
improve Netflix's algorithm by 10%. The winning team used a
blend of techniques, including collaborative filtering and In "Neural Collaborative Filtering," He et al. present a deep
matrix factorization, to achieve a 10.06% improvement in learning model for recommender systems that combines matrix
accuracy (Bell & Koren, 2007). factorization with neural networks. The authors show that their
model outperforms traditional matrix factorization.
Netflix uses a combination of supervised and unsupervised (Mohammad Tusher Ahamed, 2019).
machine learning algorithms to optimize its streaming quality.
In their paper, "Optimizing Video Quality for Millions of Overall, the use of Artificial Intelligence has been instrumental
Netflix Customers," Zhu et al. discuss how Netflix uses a in Netflix's success, and the company's innovative approach of
machine learning model to predict the probability of buffering using AI has set a benchmark for others in the industry to
and adjust the video quality accordingly (Zhu et al., 2015). follow.

Netflix is investing heavily in producing original content, and III. METHODOLOGY


they use data analytics to determine which shows to greenlight.
In their paper, "How Netflix uses analytics to select movies, The purpose of this term paper is to analyse how Netflix has
create content, and make multimillion-dollar decisions," Zetlin implemented creative data science in its business to improve its
and Graham discuss how Netflix uses data to make decisions services and retain its customers. The methodology for this
about which shows to produce, how to market them, and when paper includes a comprehensive literature review of academic
to release them (Zetlin & Graham, 2018). and industry sources on the subject. The literature review
involves analysing the available literature on how Netflix has
In "Deep Learning for Recommender Systems," Zhang et al. used data science to improve its operations, with a particular
discuss how deep learning techniques can be used to improve focus on personalized recommendations, content optimization,
the accuracy of recommender systems. The authors present a and forecasting customer behaviour.
deep learning model that uses both user and item features to
make recommendations (Zhang et al., 2017). The literature review is conducted using online academic
databases, such as Google Scholar, IEEE explore, and Science
In "Contextual Bandits in a Collaborative Filtering Framework Direct. The search terms used include "Netflix", "data science",
for Personalized Streaming Video Recommendations," "machine learning", "personalized recommendations", "content
Gopinath et al. discuss how Netflix uses a contextual bandit optimization", and "customer behaviour forecasting". The
algorithm to make personalized recommendations to users. The papers are reviewed based on their relevance to the research
algorithm considers the user's current context, such as the time question, quality, and credibility.
of day or the device being used, to make recommendations
(Gopinath et al., 2014). The findings from the literature review are used to identify the
different strategies and technologies used by Netflix to collect,
Netflix uses reinforcement learning techniques to optimize its analyse, and utilize data. The analysis is based on the principles
video encoding process. In their paper, "Toward Automated of grounded theory, where the themes and categories emerge
Video Encoding Parameter Tuning via Deep Reinforcement from the data itself (Strauss & Corbin, 1998). The identified
Learning," Lin et al. discuss how Netflix uses a reinforcement themes are then used to construct a comprehensive
learning algorithm to automatically adjust video encoding understanding of how Netflix has implemented data science in
parameters to improve video quality and reduce bandwidth its business.
usage (Lin et al., 2018).
The methodology also includes an examination of the
challenges and risks that Netflix faces in the implementation of

© 2023 IJSRET
1740
International Journal of Scientific Research & Engineering Trends
Volume 9, Issue 6, Nov-Dec-2023, ISSN (Online): 2395-566X

data science, such as data privacy and security concerns. This 3. Forecasting Customer Behaviour
analysis is based on a review of industry reports, news articles, Another way Netflix has implemented data science is through
and academic research on the subject. The findings from this its forecasting capabilities. The company uses machine
analysis are used to provide insights into the potential risks and learning algorithms to predict how customers are likely to
challenges of implementing data science in a business. behave in the future, such as whether they are likely to cancel
their subscriptions or how much they are likely to spend on
IV. RESULTS content. This information is then used to create targeted
marketing campaigns and retention strategies (Liu et al., 2020).
The literature review conducted for this term paper reveals that
Netflix has implemented creative data science in several areas Netflix's forecasting strategy includes several machine
of its business to improve its services and retain its customers. learning-based models, such as survival analysis, propensity
The following sections describe the key findings on how score modelling, and random forest models. Survival analysis
Netflix has used data science to provide personalized is used to predict the likelihood of a customer churning, while
recommendations, optimize content, and forecast customer propensity score modelling is used to predict the likelihood of
behaviour, as well as the challenges and risks the company a customer taking a particular action, such as upgrading their
faces. subscription (Graepel et al., 2010). Random forest models are
used to predict how much a customer is likely to spend on
1. Personalized Recommendations content based on their viewing history and other demographic
Netflix's personalized recommendation system is one of the key information (Fawcett, 2006).
ways the company has implemented data science in its
business. The company collects data on its customers' viewing V. CHALLENGES AND RISKS
history, ratings, and search behaviour to suggest content they
are likely to enjoy. The recommendation system has been a Although data science has been crucial to Netflix's success, it
significant factor in driving customer engagement and retention has also presented challenges and risks. One of the primary
on the platform (Li et al., 2019). concerns is data privacy and security. As Netflix collects large
amounts of data on its customers, there is a risk of a data breach
Netflix's recommendation system utilizes several machine- that could compromise personal information. Additionally,
learning algorithms, such as collaborative filtering and content Netflix faces challenges in finding the right balance between
based filtering. Collaborative filtering recommends content utilizing data and respecting customers' privacy (Chen et al.,
based on a customer's viewing history and ratings, while 2018). result in customer dissatisfaction and could potentially
content-based filtering recommends content based on the harm Netflix's reputation (Vries et al., 2019). Additionally,
attributes of the titles the customer has previously watched Netflix's algorithms may not account for changing customer
(Sarwar et al., 2001). Netflix also utilizes deep learning preferences, which could result in outdated recommendations
techniques, such as convolutional neural networks, to analyse and content that fails to resonate with audiences.
visual and audio data in its content to provide recommendations
based on the customer's preferred genres, themes, and moods Finally, Netflix's data science capabilities also rely on the
(Covington et al., 2016). availability and quality of data. If the data collected is
incomplete or inaccurate, it could affect the accuracy of the
2. Content Optimization algorithms and the resulting recommendations and predictions.
Netflix also uses data science to optimize its content delivery. Additionally, Netflix may face challenges in accessing data in
The company collects data on how customers interact with certain regions, which could impact the effectiveness of its
different types of content, including how long they watch personalized recommendations for customers in those areas.
specific titles, which parts of a show they skip, and how often Despite these challenges, Netflix has continued to invest in its
they re-watch episodes. This information is used to make data science capabilities to enhance its services and improve
decisions on which shows to produce, how to market them, and customer retention. The company has shown that creative data
which titles to acquire from other studios (Sculley et al., 2014). science has the potential to drive significant growth and
Netflix's content optimization strategy includes A/B testing and innovation in the media industry.
machine learning-based analysis. A/B testing is a method that
compares two different versions of a content asset, such as a VI. DISCUSSIONS
trailer or a poster, to determine which version performs better
in terms of customer engagement (Jing & Smola, 2017). Netflix Netflix has been at the forefront of using data science to
also uses machine learning-based analysis to understand how revolutionize the media industry. By leveraging vast amounts
different variables, such as the length of the show or the casting of customer data, Netflix has been able to personalize its
choices, impact customer engagement (Joshi et al., 2016). content recommendations and improve customer retention. The

© 2023 IJSRET
1741
International Journal of Scientific Research & Engineering Trends
Volume 9, Issue 6, Nov-Dec-2023, ISSN (Online): 2395-566X

company has invested heavily in its data science capabilities


and has developed advanced algorithms that consider a wide However, there are also challenges associated with the use of
range of factors, including customer viewing history, genre data science in the media industry. These include the potential
preferences, and even the time of day when content is for bias in algorithms and the need to ensure the accuracy of
consumed. recommendations and predictions. As the industry continues to
evolve, it will be important for companies like Netflix to
One of the key benefits of Netflix's data science approach is its continue to invest in their data science capabilities and to be
ability to create personalized recommendations that are tailored mindful of these challenges as they develop and deploy new
to each customer. This is an effective strategy for improving algorithms and models.
customer engagement and retention (Covington et al., 2016).
By using data to better understand customer preferences and Moving forward, there is great potential for data science to
behaviour, Netflix can offer content that is more likely to be of drive further growth and innovation in the media industry. As
interest to each user. This creates a more positive user more companies begin to adopt similar approaches to Netflix,
experience and makes it more likely that customers will the competition will become even more intense. However,
continue to use the service. companies that can effectively leverage data science to create
personalized user experiences and drive engagement are likely
However, there are also challenges associated with the use of to emerge as industry leaders.
data science in the media industry. One of the most significant
is the potential for bias in the algorithms used to make content Overall, the case of Netflix demonstrates the transformative
recommendations (Chen et al., 2018). If the algorithms are not power of data science and the potential for it to revolutionize
designed carefully, they may reinforce existing biases or limit entire industries. By leveraging creative data science, Netflix
exposure to diverse content. This could lead to a lack of has been able to create a highly personalized user experience
representation for certain groups of users, which could that has driven significant growth and innovation in the media
negatively impact their user experience and lead to reduced industry. While challenges remain, the future of data science in
engagement with the platform. the media industry looks bright, and companies that can
effectively harness its power are likely to see continued
Another challenge for Netflix is ensuring the accuracy of its success.
algorithms. While the company has invested heavily in data
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