Why Netflix changed its algorithm to track the shows you're actually watching

The CEO of Netflix has offered insight into how the online streaming service arrives at the suggestions it makes to users about what shows and movies to watch.

During a question-and-answer session Saturday morning at the TED conference, Reed Hastings, the co-founder, chairman and CEO of Netflix, talked about running the multi-billion dollar company.

Sitting onstage with lead TED curator Chris Anderson, Hastings provided this description of Netflix's programming strategy:

"We have some candy," Hastings said. "But we have lots of broccoli, and if you have a good mix you get to a healthy diet."

A few years ago, the company changed the algorithm that recommends shows and movies for its users.

Previously, the algorithm relied more on what users disclosed about their programming preferences of Netflix selections. In other words, what users said they liked. 

Now, it depends more on what users actually watch. 

"What happens is, when we rate, we're meta-cognitive about quality — that's sort of our aspirational self," he said.

"It works out much better, to please people, to look at the actual choices that they make."

'It's not enough'

Anderson asked Hastings if changing the algorithm had the potential to create a feedback loop of increasingly low-brow content. 

But Hastings said watching habits for most users enjoy a range of different kinds of programming. 

For many, that means binge watching reality cooking shows, he said. But it also means occasionally watching films like Oscar-nominated period drama Mudbound.

"What we want to [offer] is a variety," Hastings said. "What we haven't seen is this race to the bottom."

Hastings also discussed Netflix's strategy of investing more in original programming — an investment he said now tops $8 billion worldwide, rivalling companies like Disney.

"And it's not enough," he said. "It's not as much as it sounds."

Hastings explained that investing in content is a decision partly based on branding — the more people associate the company with its own award-winning shows like The Crown and Stranger Things, the more subscribers they can generate.

Growing competition

Netflix raised its monthly cost for users last August. Subcribers now pay $10.99 per month to watch high definition video on up to two screens at a time. 

The company has more than 117 million members in almost 200 countries, but has been facing a growing number of competitors in the online streaming sector. 

CraveTV, owned by Bell Media, holds the rights of some content from U.S. streaming site Hulu, while Amazon Prime Video acquired streaming licences for Mr. Robot and Starz cable series American Gods.​