Is Netflix Moving Away from AI for Content Curation?

Netflix (NFLX) is looking to humanize its content curation with the new Netflix Collections, according to TechCrunch. Netflix Collections contains content suggestions handpicked by humans. The company relies on AI to categorize and recommend content to viewers. This AI relies on user viewing data to offer suggestions of content to watch.

Netflix’s human curation takes a different approach than AI curation, in which the categorization of content is narrower. According to TechCrunch, titles in Netflix Collections are curated by specialists based on “genre, tone, story line and character traits.”

AI has worked well for the company in content curation before. However, it hasn’t been able to refine content suggestions to subcategories such as theme. Machines are able to crunch large data sets to come up with hundreds of suggestions, but the lack of a human touch leads to the inaccurate personalization of content recommendations. This is the gap the human-led categorization aims to fill.

However, we believe that the recommendation system will work better if viewers can create and share their own watch lists with their peers. The Netflix app comes with a My List tab under which users can curate their own content. Leveraging this tab to augment Netflix AI curation has the potential to improve the suggestion system.

Competition in the content streaming market is heating up. In November, the Walt Disney Company (DIS) will roll out Disney+, an ambitious project that could shake up the global video streaming market. The price of a Disney+ subscription could also undercut Netflix. Further, Disney+ will be removing some content from Netflix, and that may have some subscribers thinking about switching. Apple (AAPL) will also launch Apple TV+ this November, further expanding streaming choices for viewers.

The increased competition is already having an effect on Netflix stock. NFLX has been bearish since July, when it announced that some shows would exit its platform. On August 26, NFLX was trading at $294.98, down 22.6% from July.

Nonetheless, Netflix is working hard to ensure that users find more reasons to stay put—even with some content exiting to rival platforms. For starters, the ability to easily find content to watch on the platform could hold subscribers back from ditching it. The company is also increasing its budget for more original content to keep viewers busy. With increased original content and a more human touch in its content recommendation system, NFLX should be able to maintain its dominance in the streaming sector. Subsequently, we believe that Netflix stock could recover before the year’s end.