This week I read an article on how Netflix offered a $1 million dollar prize associated with a contest to improve its movie recommendation system by at least 10 percent.

I assume everyone knows who Netflix is and how they work, but in case you don’t it is an online DVD movie rental business. Customers create accounts and pay monthly fees to receive DVDs through the mail. When finished viewing the movie, the customer mails the DVD back to Netflix and Netflix mails out another movie that is on the customer’s movie wish list.

A company with a subscription based business model, Netflix needs to focus on keeping customers signed up with their service to grow their business. The recommendation system is one means to accomplish this. When customers provide feedback on how much they like a movie they rented, the recommendation system provides additional movie suggestions for that customer. If the recommendation system works and accurately suggests new movies to the customer that they might not have known about, then the customer is more likely to continue with their subscription.

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