Netflix Offers Prize to Refine Its Service

Online DVD rental pioneer Netflix Inc. wants suggestions on how to improve its movie recommendation system and is dangling a $1-million reward as an incentive.

The prize, offered in a contest that began Monday, is part of Los Gatos, Calif.-based Netflix’s effort to sharpen its competitive edge as it continues a bitter duel with Blockbuster Inc. and prepares for an anticipated onslaught of services that make it easier to download movies onto computer hard drives.

By spurring software engineers to develop a better way to decipher consumer tastes, Netflix is betting its market-leading DVD service will become more useful to its 5.2 million subscribers and attract new customers.

To win the prize, an engineer must write a software program to improve the accuracy of Netflix’s movie recommendation system by at least 10%. The differences will be tracked by another program that quantifies how well the systems work.

“Right now, we’re driving the Model T version of what is possible,” Netflix Chief Executive Reed Hastings said. “We want to build a Ferrari and establishing the Netflix Prize is a first step.”

Entertainment industry analyst Dennis McAlpine doubts Netflix is going to get much bang for its buck.

“I’m a little surprised because their current system already works so well ... ,” he said. “This looks like a marketing gimmick.”