Power laws, NetFlix, and search
Posted March 17th, 2008 by shunting
According to David Leonhardt's New York Times article on Netflix -- instead of having a power law for on-line DVD rentals that is similar to the power law at work with theatrical releases -- the distribution of DVD rentals on Netflix is actually closer to the relatively tight bell curve of the normal distribution:
Out of the 60,000 titles in Netflix's inventory, I ask, how many do you think are rented at least once on a typical day?
The most common answers have been around 1,000, which sounds reasonable enough. Americans tend to flock to the same small group of movies, just as they flock to the same candy bars and cars, right?
Well, the actual answer is 35,000 to 40,000. That's right: every day, almost two of every three movies ever put onto DVD are rented by a Netflix customer.
(Having about 66%, "two of every three," of the movies being rented, rather than 10, 20, or 25%, would be consistent with the familiar bell curve of the Gaussian distribution.)
This is a paradox. Why would only 20% of movies find a commercially meaningful audience when they are released in theatres, but 66% of movies find an audience when distributed via Netflix? David Leonhardt's article offers up an important clue to resolving this paradox:
"Americans' tastes are really broad," says Reed Hastings, Netflix's chief executive. So, while the studios spend their energy promoting bland blockbusters aimed at everyone, Netflix has been catering to what people really want and helping to keep Hollywood profitable in the process.
The solution to this paradox is simple: becoming eclectic. As it turns out, people have broad tastes and interests that extend far beyond the manipulative strictures imposed by media giants. People value diversity; they're eclectic.
On a profound level, Netflix -- in contrast to pre-existing distribution channels (including other DVD rental outlets like Blockbuster) -- became as eclectic as the audience. Either by serendipity or by epiphany, Netflix has found a way to offer people what they really, sincerely want. Netflix is one business model where an eclectic supply is meeting eclectic demand.
Interesting. The post is 2006. Still true?
