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Netflix gives $1 million award in recommendation contest

Written by James Delahunty (Google+) @ 21 Sep 2009 22:50 User comments (1)

Netflix gives $1 million award in recommendation contest Netflix has paid out a $1 million reward to a seven-member international research group after the group won a contest held by Netflix to improve its predictions of movies a customer might like to view. The contest was launched in 2006 and witnessed 51,000 contestants from 186 countries participate ever since.
"I was stunned at how the Netflix Prize created its own economy of researchers competing and collaborating," Netflix CEO Reed Hastings said. BellKor's Pragmatic Chaos, the winning team, had improved Netflix movie recommendations success by more than 10 percent to claim the prize.

Technically however, it had drawn with a rival group called the Ensemble at a 10.6 percent improvement, but it was declared the winner at an awards ceremony on Monday because it submitted its final entry just a few minutes before Ensemble managed to.

Netflix has more than 100,000 films and TV shows available, so making improvements to its recommendation system is far from easy, but will undoubtedly result in long-term revenue gains that easily surpass $1 million.

Paying out $1 million shows how important it is for the company to make sure customers keep on coming back and selecting more movies, and keep paying for the service, as does Netflix' intention to hold a second contest.

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1 user comment

122.9.2009 1:50

$1,000,000 is probably chump change compared to what they will gain from giving customers 10+% "better" recommendations, which means they are more likely to rent more movies.

Yes, it's unlimited rentals but you might upgrade to a higher tier because you've noticed how many great movies Netflix offers that you didn't even know about. Also, you'll recommend friends to the service who will find movies they enjoy and the cycle repeats.

Netflix announced that they had reached ten million members in February of 2009, which means they get a minimum of $89.9 million ($8.99 * 10,000,000) per month in member monthly fees alone.

While I don't know what their monthly net income is, they can definitely afford to award $1 million to someone who improves their recommendation system by 10%.

Peace

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