Netflix: Leveraging Artificial Intelligence (AI) to Dominate the Streaming Market
| Case Code: ITSY139 Case Length: 15 Pages Period: - Pub Date: 2024 Teaching Note: Available |
Price: Rs.500 Organization: Netflix, Inc. Industry: Leisure & Entertainment Countries: United States Themes: Artificial Intelligence, Competitive Strategy, Technology in Entertainment,Business Analytics |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Growth of Artificial Intelligence (AI)
The concept of AI emerged in the early 20th century. However, it was not until the mid-20th century that significant progress was made in that space, with the development of the first AI programs designed to perform specific tasks, such as theorem proving and game-playing. Throughout the latter half of the 20th century, AI research experienced periods of both rapid advancement, as well as stagnation. The development of expert systems in the 1970s and 1980s marked a significant milestone, enabling computers to mimic human expertise in specialized domains. However, in the 1990s, the limitations of rule-based systems became apparent, leading to a shift toward more data-driven approaches..
Netflix Leveraging AI
It was in the mid-2010s that AI began to shake up the broadcasting landscape and media & entertainment industries. In order to gain a hold on consumer interest, viewing habits, viewing pattern, and preferences of genre, OTT companies began investing heavily in AI. All players, small and big, began leveraging AI to streamline their services, attain differentiation, and garner customer attention..
The Streaming Quality
As of 2023, Netflix was serving approximately 220.67 million active users worldwide each month. Delivering high-quality video to such a vast audience simultaneously posed significant challenges. Buffering posed a major issue across various streaming services, prompting most users faced with the issue to exit the platform after just a few seconds of waiting. Additionally, there were customers who were likely switch to competing platforms if the buffering of the videos became a consistent issue. Thus, buffering not only detracted from the customer experience, but also risked causing a loss of valuable viewing time for Netflix..
Content Creation
Content creation played a pivotal role in Netflix’s business model, with AI prominently featuring in the process. ML algorithms were utilized in analyzing extensive datasets, identifying new content opportunities, guiding creative decisions, and optimizing content delivery. Analysts felt that Netflix consistently met the expectations of users in their own productions. Utilizing user data, including viewing behaviors, search queries, and social media trends, predictive analytics helped frame a viable content creation strategy..
Limitations to AI at Netflix
Industry experts opined that ML and AI, however, lacked the ability to comprehend human emotions and experiences accurately, which was necessary in compelling storytelling. While ML and AI could analyze large datasets and identify patterns, they lacked the intuition or empathy inherent in human beings. AI often faced challenges with creativity and originality, leaning toward relying on established patterns and past examples rather than generating new and innovative ideas. Despite its capacity to generate novel concepts, AI’s creativity was constrained by the data it was trained on, as it limited its ability to produce truly original concepts..
The Road Ahead
AI was expected to help Netflix differentiate itself from competitors and attract and retain subscribers. However, as other streaming platforms also leveraged AI technologies, analysts felt that the competition in the industry would intensify in the future. They thought that Netflix should continue innovating in the AI space and stay at the forefront of AI developments to maintain its competitive advantage and meet evolving customer needs..
Exhibits
Exhibit I: Netflix Timeline
Exhibit II: The World’s Most Popular Video Streaming Services in November 2019
Exhibit III: Netflix’s Subscriber Count over the Years
Exhibit IV: Netflix Inc.’s Key Financials
Exhibit V: Multi-dimensionality of the Netflix Personalization System
Exhibit VI: Netflix Supply Chain with Predictive Quality Control
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