aTypical Joe: a gay New Yorker living in the rural South

Tuesday, October 03, 2006

Worth a million

Netflix is offering a million-dollars to the team who can come up with the best improvement to its DVD recommendations. Chris ”Long Tail” Anderson looks at why:

The simple answer is that search, recommendations and other filters tend to drive demand down the tail, from the hits down to the niches where minority tastes are often better satisfied. Aside from happier customers, this also has some clear economics benefits for Netflix. It so happens that older titles, well down the Long Tail of time, are both cheaper to acquire and tend to get higher ratings than new titles (mostly because they’ve passed the test of time and have moved beyond the fog of hype that accompanies new releases). Not only that, but Netflix can also buy fewer of them, since as you go further down the curve the demand is spread out over more titles and there’s less of a need to buy stacks of expensive new blockbusters to satisfy the rush of rentals requests around the release date. 

Read on for the charts and graphs and detailed reasoning that back up his assertion.