How Netflix Can Change Video on Demand in Germany

This article was originally posted on the blog of Berlin-based startup Tweek in late 2014, when Netflix launched in Germany

Working in Video Discovery for three years, our team at Berlin-based startup Tweek has heard the name Netflix being tossed around with curious excitement and a great deal of hope for Germany’s movie and TV series enthusiasts many times before. After weighing the pros and cons, we add to those who believe that the streaming giant could bring the change everyone is waiting for…

On May 21, 2014, on demand video service Netflix confirmed its expansion into the European market on its Twitter account: 17 years after its start in the United States, seven years after moving away from its original business model of mailing DVDs to video on demand via the Internet, four years after its first international expansion (Canada) and two years after its launch in Europe (UK and Ireland), six new countries were to be introduced to the Netflix-way of video on demand. With the streaming service’s launch in Germany, the video entertainment industry has pressing questions…

Will Netflix be any different from current subscription video on demand services? Will it be able to live up to its carefully built reputation? And most importantly: Can it really revolutionize Germany’s video on demand market?

The Netflix Launch in Germany: An Insider’s View

At Tweek, we help consumers discover great video content from various destinations, such as live television and catch up libraries to video on demand models from pay per view to subscription services. We know first-hand, it’s not easy to transform the rapidly increasing number of available videos and its discovery into an inspiring user experience. But working on a Recommender and Personalization technology since 2011, we are equipped with knowledge which helps to understand the video entertainment sector — and Netflix’ market entry — from a particularly valuable perspective.

For an audience, a certain content catalogue brings a first chance to judge a new video service and can already determine whether or not it is worth its price. But regional variations of content sets are inevitable and lead to one of the provider’s biggest challenges: Having sold certain rights of its original series House of Cards to pay TV provider Sky Deutschland and the rights of its first exclusive offer Lilyhammer to TNT Serie and public broadcaster Arte, Netflix seemed to be entering the German market to a shaky start. But there is more to the streaming service’s potential than first meets the eye.

“For us, the most important difference between Netflix and traditional German video services is the company’s ‘tech DNA’. It’s an essential advantage that Netflix has stood out as a data-driven service with a focus on personalization for years.” — Sven Koerbitz, founder and CPO at Tweek

With more than 50 million subscribers in over 40 countries, Netflix is no newcomer to the game: The company knows the value of an inspiring user experience and even sets the pace internationally, having for example put years of professional skills into its recommender software Cinematch — which analyzes each user’s viewing habits and recommends similar content they might like — and in 2006, a one million dollar prize for the first developer who could beat its performance. Furthermore, Netflix has access to valuable amounts of data, being able to for example focus on pivotal aspects related to their consumers’ individual taste preferences such as viewing times, ratings and recommendations. To understand Netflix’ unique approach which sets the company apart from traditional German video services, we are considering three more essential factors that can support a potential breakthrough in Germany.

1. Personalization

The first interaction with a new product is crucial, being a consumer’s initial chance to evaluate both performance and trust. Taking advantage of already existing data which movie buffs have been collecting on databases like IMDb for over 15 years, easily adds an enriched framework to a video service. Also, enabling a social sign-up with Facebook Login helps to overcome a product’s cold start problem: Content-related Open Graph actions (like, watches, wants to watch, rate) are fetched from the social network and matched to a certain content set, resulting in an instantly personalized user experience.

“(An) important element in Netflix’ personalization is awareness. We want members to be aware of how we are adapting to their tastes. This not only promotes trust in the system, but encourages members to give feedback that will result in better recommendations.” — from the Netflix tech blog

2. Recommendations

Recently, Netflix’ Xavier Amatriain declared that “the age of search has come to an end” while addressing the recommender problem. In this context, we want to differentiate two main kinds of recommendations: On the one hand, there is Collaborative Filtering, which makes automatic predictions about a user’s interests by collecting preferences from similar users. On the other hand, item-to-item recommendations are the result of encoding Graph-based content similarities for related movies and TV shows.

“Looking at similarity between movies and TV shows is a useful way to find great titles to watch. (…) First we discover sets of titles that may be similar to the source title. We then refine these sets of titles and filter them to remove unwanted matches. After this, we dynamically weigh each facet and score it. The sum is the measure of similarity: the higher the sum, the more similar the titles.” — from the Netflix tech blog

3. Social Discovery

Not only machine-learned recommendations ensure a great product. Connecting a users’ social network accounts with a video platform transforms friends’ shared online activity into an entertainment stream within seconds. Netflix has extended these social signals within its product, introducing a Facebook message feature which allows users to privately recommend content they love to their friends.

“At Netflix, we believe that great stories have the power to connect us with the people we care about.” — from the Netflix tech blog

“We know that considering single users, their individual interest profiles and current context, helps to build future-proof experiences. It enables engagement with relevant content and recommended items to guarantee higher click-through-rates, retention values and increasingly higher numbers of watched videos per user.” — Marcel Düe, founder and managing director at Tweek

Besides Netflix’ unique ‘inner’ values, let’s not forget about the outward appearance, because an overall great user experience can be found in every detail of a product: Rounding generic posters up with big and meaningful movie and series stills, quotes supporting the essence of a video and accompanying explanations as to why the service recommends a certain movie or show, makes a product authentic, trustworthy and fun to use.

Netflix’ Launch Party in Berlin: An Insider’s Impression

On September 16, 2014, Netflix invited fellow industry partners and press to the impressive Komische Oper in Berlin’s Mitte district to celebrate its launch in Germany — with drinks in Netflix-red, content-loaded installations and even a built-in OITNB-like prison cafeteria. Mingling with Netflix’ original series stars Taylor Schilling, Laura Prepon, Kate Mulgrew and Uzo Aduba from Orange is the New Black, director Eli Roth and Famke Janssen from Hemlock Grove and Robert Rodriguez, D.J. Cotrona and Zane Holtz from From Dusk till Dawn while discussing first impressions of the newly-launched product, made this event a night to remember — welcome to Germany and thank you for a great night, Netflix!

Conclusion

With its worldwide success, Netflix has set high expectations in Europe. German consumers are ready for the streaming service everyone has been talking about, but only a few have had access to. Netflix’ launch in Germany may not revolutionize the local video on demand market within weeks or months. But subscribers will appreciate the new features and introduced level of personalization based on Netflix’ consumer-oriented technology — and this will hopefully lead German competitors to overthink their more traditional services for an overall better user experience.

- Team Tweek