The Worth of Recommendation Engines

How much is recommendation software worth to producers of content?

Anne Thompson writing in Variety

Both Amazon and Netflix have the ability to “recommend” similar movies to their customers, even if the titles are utterly unknown, on the basis of having rated such genres as sports docs, Bollywood musicals or Jane Austen romances. “We can get a film to perform as if it did $1 million at the box office,” says Netflix chief content officer [Ted] Sarandos, “without spending the marketing dollars to get that. Instead of a distributor recouping its dollars, that money will flow back to the filmmaker.”

In other words, the recommendation technology at Netflix — the softwares that says: based on your past ratings of movies you should like this new one — will spur rentals as if it were a film earning at least $1 million at the box office. Let’s say that increase in DVD usage amounts to 10% of total sales. That’s a lift of $100,000 per film on average. Netflix currently offers 70,000 films. That means that Netflix’s recommendation engine is worth about $7 billion to the film industry.