Netflix vs. The Little Guy: A Battle of Algorithms and Emotions

On a sun-drenched September morning in New York, the mail-order-movie company Netflix presented a $1 million prize to a team of seven computer experts. The winners appeared bleary-eyed but giddy, basking in the afterglow of a scientific breakthrough.

They had devised the algorithm that would improve the company’s recommendation system by twice the accuracy of the current one. It took 700 statistical models and three years, but 10 million Americans would soon be using their system — a system that the company boasted will work better than word of mouth.

“The old-fashioned talking-to-someone [method] is the most imperfect system there is,” says Steve Swayze, vice president of corporate communications. “What Netflix offers now in terms of ratings is the best there is.”

Netflix ships its red envelopes across the United States from a variety of regional centers, but its home is in Los Gatos, California, the beating heart of Silicon Valley. The Netflix breakthrough embodies the ethos of the region. It is a victory for the Internet, for the ascendancy of technology, and is a testament to the power of remote communication: the ceremony was the first time that the winning team had all been in the same room together.

“There will be holdouts, but people are going to give it up. There will be a point when stuff just disappears. People think that it’s all on the Internet. It’s not.”

On a far less spectacular fall afternoon in Midtown Manhattan, the kind of afternoon where the only promise is rain, David Buffa stands in his store, New York Video (a name that sounded more hopeful when he picked it 22 years ago), and reflects on Netflix’s achievement.

“Netflix can do all the algorithms they want,” he says. “It’s not the same as actually talking to someone.”

A handful of video stores still dot the streets of New York, survivors among the multitudes that have vanished from the American landscape in the past decade. As they disappear, lost to competition from Netflix, “movie boxes” at supermarkets, or the Internet, thousands of recommendation systems go with them, based on the proclivities of the clerks, sometimes hindered by hangovers or shoddy communication, by nature imperfect. They run on human relationships rather than spectacular algorithms.

New York Video sits beneath a soot-streaked red awning on 1st Avenue, on a block of four-story brick buildings surrounded by hulking office and condo towers. It opened in 1987. It was around when video stores were the next big thing — when they were the big thing — and it is here now.

The store houses 30,000 titles — allegedly the biggest collection in New York. (Netflix has 100,000.) Movie covers are laminated and sorted into bins along the walls: Marlene Dietrich, Bette Davis, Greta Garbo, Woody Allen, Danish, Horror, Cult, the 1940s, Superhero Films, Brit Classics, Stand-up, and Hallmark Hall of Fame — right next to John Waters. Like Netflix, New York Video delivers, but on foot and only between 42nd and 65th Streets, Lexington Avenue and the East River.

David Greene has worked here, on and off, for the past 20-some years, and he’s working today, wearing a green bandana around his neck and asking a customer, “Did Mean Girls do it for you?” When the store is quiet, which is more and more these days, he listens to Yankees games on the radio.

“I didn’t love working at the video store when I was younger,” he says. “It’s a hard job; customers can be difficult. It’s not the highest-paid job in the world. Usually, people work here while they work on their other careers. But I like it now. The things I minded then, I don’t mind anymore.”

Greene has left the job at various times to play in a rock band, to act in plays and a movie called Remembering Maria (a VHS copy appears on the shelf but not on IMDB or Google), and to paint pictures of pop icons that look like photographs. “It was stressful before,” he says, “I like waiting on people now. I’m not as ambitious.”

The phone rings, and Greene hustles to the new release wall. “Did you see Che with Benicio Del Toro? Lymelife? Didn’t like it? Ghosts of Girlfriends Past? It’s a new release. I know you like new releases. It’s a comedy — romantic comedy.”

He hangs up and adds the movie to the delivery pile. The caller, a Mr. Gilbert, rents two to three times per week, dislikes anything with sex or violence, and is picking a movie to watch with his wife, who also is fussy. “He has seen almost everything,” Greene says wearily.

Explaining his recommendation system, Greene says, “You start talking about movies; you get a feel for what they like. It’s good when they have sort of an idea of what they’re looking for. A lot of people just want affirmation. When we haven’t seen them before, it’s very difficult.” But new faces are not really a problem.

When asked how many customers are regulars, Greene replies that they’re all regulars. “It’s rare to go to most stores and have a conversation with the sales help,” he adds. “Something about movies and music — when I talk about movies I like, the emotional connection is there.”

A couple enters. They browse, confer softly, and pace. They don’t need any help and leave without renting anything. “I see couples arguing in here all the time,” Greene says. He mimics, “‘You rented last; I get to pick this time.’” He tries to find a commonality when advising them. “If one wants a romantic comedy and the other is looking for action, I would recommend Terminator. It’s an action movie, but it’s also a very romantic movie. He comes back from the future to save her because he’s in love with her.”

Netflix’s new system doesn’t try to counsel couples. It recognizes only one person on each account, like the last system, producing sometimes-strange results when two or more people with different tastes share an account. It also has trouble recommending for newcomers and people who can’t be bothered to use the five-star ranking system. Its next competition will attempt to address the latter issue, releasing new data and two $500,000 prizes for teams that create more accurate algorithms based on demographic information.

“We are halfway between where we were and perfection,” Swayze says confidently — Netflix rating every movie exactly as the customer would. There is a pause, and Swayze speaks again, less confidently this time. “It’s hard to do. We’re using a mathematical process to determine human emotions. Essentially, it’s an emotional issue, and it’s very difficult to predict that perfectly.”

Jennifer Chien, a fan of indie horror flicks and 1970s movies, keeps accounts at both New York Video and Netflix. The Netflix account is less expensive she says, and Netflix carries more Blu-Ray. But she wants a place to rent impulse movies, and she doesn’t always like the Netflix recommendations.

“They don’t really work for me,” she says. “One time you rent something embarrassing like a Sandra Bullock movie, and 27 Dresses keeps popping up. It’s easier to go to New York Video and explain all your neuroses to the person there. They all have their own taste; you get to know who will recommend the stuff you like. I’m pretty sure there’s one guy there who’s seen every horror movie.”

Based on the employee’s recommendation, Chien rented The Sentinel the last time she visited. “It was very creepy and odd, and not exactly what I was expecting, but I’m glad I watched it,” she says.

Buffa started working at New York Video in 1985, back when it was part of a local chain. Greene worked there too. When the company went bankrupt, Buffa, who had no small-business experience, bought it with some of the other employees. “We flew by the seat our pants; we had no idea what we were in for. At the time, it didn’t matter. We were making tons of money.”

Over the years, he learned about small business. Increasingly, he has learned about the down side. “I don’t see a future for our stores,” he says. “There will be holdouts, but people are going to give it up. There will be a point when stuff just disappears. People think that it’s all on the Internet. It’s not.”

How long New York Video remains open depends on a lot of things, Buffa says — the customers, the economy, the neighborhood. “On how much I want to sacrifice,” he adds. “I need to pay my own bills, not just the store’s.”

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