Netflix's recipe for success spiced with Silicon Valley savvy

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Although its video streaming service sparkles with a Hollywood sheen, Netflix still taps its roots in Silicon Valley to stay a step ahead of traditional TV and movie studios.

The company frequently reaches into its technological toolbox without viewers even realizing it. It often just uses few subtle twists on the knobs of viewer recommendations to help keep its 270 million worldwide subscribers satisfied at a time when most of its streaming rivals are seeing waves of cancellations from inflation-weary subscribers.

Even when hit TV series like “The Crown” or “Bridgerton” have wide appeal, Netflix still tries to cater to the divergent tastes of its vast audience. One part of that recipe includes tailoring summaries and trailers about its smorgasbord of shows to fit the personal interests of each viewer.

So someone who likes romance might see a plot summary or video trailer for “The Crown” highlighting the relationship between Princess Diana and Charles, while another viewer more into political intrigue may be shown a clip of Queen Elizabeth in a meeting with Margaret Thatcher.

Netflix is able to pull off these variations through the deep understanding of viewing habits it gleans from crunching the data from subscribers' histories with its service.

“It is a secret sauce for us, no doubt,” Eunice Kim, Netflix's chief product officer, said. “The North Star we have every day is keep people engaged, but also make sure they are incredibly satisfied with their viewing experiences.”

What Netflix is doing with its previews may seem like a small thing, but it can make a huge difference, especially as people looking to save money start to winnow the number of streaming services they have.

Last year, video streaming services collectively suffered about 140 million account cancellations, a 35 percent increase from 2022 and nearly triple the volume in 2020, when the COVID-19 pandemic created a boom in demand for entertainment from people corralled at home.

Netflix doesn't disclose its cancellation, or churn rate, but last year its streaming service gained 30 million subscribers.

Part of last year's subscription growth flowed from a crackdown on viewers who had been freeloading off Netflix subscribers who shared their account passwords.

But the company is also benefiting from the technological know-how that helps it to keep funneling shows to customers who like them and make them think the service is worth the money, according to J. Christopher Hamilton, an assistant professor of television, radio and film at Syracuse University.

“What they have been doing is pretty ingenious and very, very strategic,” Hamilton said. “They are definitely ahead of the legacy media companies who are trying to do some of the same things but just don’t have the level of sophistication, experience nor the history of the data in their archives.”