For a while, Netflix seemed like the smartest tech company around. Searching for movies online was easy; mailing them back off-line was cathartic. The company constantly tweaked its red envelopes, trying to create one that you could open while tipsy and seal one-handed while late for work. Customers were treated with respect. If you sent two discs back in the same envelope, Netflix didn’t care. Employees were treated like adults. Anyone could take vacation whenever he or she wanted. The company’s attention to detail was brilliant: the company charged everyone the same monthly fee, but subscribers who watched movies obsessively had new films sent a little more slowly.
Netflix also created a pretty darn good algorithm for figuring out what movies we’d like: what titles would make us happier and less likely to switch to a competitor. When innovation on the algorithm stalled, the company created the Netflix Prize and offered a million dollars to the first team of mathematicians who could improve the recommendation engine by ten per cent. Three years later, they had a winner. Netflix was the master of all the buzzwords of the old world (customer service; supply-chain management) and all the buzzwords of the new world (crowdsourcing, the long tail), too.
Keep reading: Netflix Earnings Report: Bad News : The New Yorker.
