Decoding the Netflix 100

When Netflix launched its online rental service 10 years ago, the mythic "top 10 most-rented films" category was, as one might expect, art house and foreign flicks. But now that it has become a mainstream giant offering more than 100,000 movies to over 8 million subscribers, you would expect that same top-10 list to have been taken over by big-grossing blockbuster hits.

Amazingly, it hasn't. As of this reporting, 98 percent of the top worldwide grossing films of all time don't even crack the Netflix 100, a list posted online every other Sunday calculating the number of times a specific movie has been viewed.

Take these examples as assaults on conventional wisdom (and, in some cases, taste): While Harry Potter doesn't make the top 100, Jane Fonda and J. Lo's comic miscarriage Monster-in-Law does. You won't find Frodo or Anakin or Peter Parker on the list, but you will find Sara Huttinger, Lucinda Harris, and Brooke Meyers. (Don't ring a bell? They're characters played by Jennifer Aniston in Rumor Has It, Derailed, and The Break-Up, respectively—big hits, according to the Netflix 100.) The list also includes such head-scratchers as Fun With Dick and Jane, Just Like Heaven, and Coach Carter. The most-watched Spielberg film according to Netflix isn't E.T., War of the Worlds, Schindler's List, or Saving Private Ryan. It's The Terminal, his 2004 Yakov Smirnoff-lost-in-an-airport dud.

So what explains these renting anomalies, and how have smaller, less expensive—and, it's worth pointing out in some cases, truly awful—films been able to stave off the influx of Hollywood blockbusters?

THE ONLINE RANKINGS PRINCIPLE
To try to explain this, the first thing you need to know is that, to this day, the Netflix 100 is the only standings that the rental giant releases online for its subscribers. This is strange when you consider the charts that you won't find on the site, like, say, top rentals for the week or month. But it also helps explain why indie films are able to compete with the big boys.

Imagine if you will the antiquated act of walking into your local Blockbuster. Displayed along the walls are independent films, critical faves, and Oscar winners. Big-budget new releases are generally placed in the center racks. You might argue that most people will make the little bit of extra effort to find the big-budget Hollywood hit. Netflix is a fascinating model to study because their user main page is set up much like this "bizarro" Blockbuster, where the prominent sections, along with New Releases and Previews, are the Netflix 100, Critics' Picks, and Award Winners.

To understand how this influences the top-rental rankings, let's take a look at the movie Crash, which grossed a modest $54.5 million in the United States. Before Oscar night, March 5, 2005, the small-budget ensemble drama was nowhere near the top of the charts. But with more than one million movie requests flooding in during the telecast, the Oscar winner quickly shot up the Netflix 100, and just over a month later surpassed Mystic River and Mr. and Mrs. Smith to grab the top spot. Amazingly, it has held on to the number-one position for more than three years. How has it achieved this remarkable feat?

For one thing, it gets a tremendous boost from what we call the online rankings principle, which states: The top entries of an online ranking tend to stay the top entries. Why? Because Web users value not only getting useful information, but also getting it quickly. It's a time-saver to equate a higher position with better. You see this principle constantly at work on search engines like Google and YouTube. They say that the rich get richer—nowhere is this as true as where online rankings are concerned.

And it's not just Crash, with its impressive streak, that has benefited from the online rankings principle. Look, for instance, at the other top-four films from last April's Netflix 100. The number-two spot was held by Mr. and Mrs. Smith, which has since dropped only four spots to number six. The number-three movie, Walk the Line, has slid only two spots to number five, while the number-four film, Hotel Rwanda, has fallen only to number eight. In fact, of the movies from last April's top 10, five are still in the top 10 and only one, Ray, has fallen out of the top 20.

This reveals something powerful about the psychology of online consumers: It doesn't matter as much what a film costs, what it's about, who stars in it, or how many special effects it has. The most important determining factor of popularity is simply its very existence on a ranked list—even one that people don't fully understand, like the Netflix 100—and its corresponding position on the chart. Put Star Wars in the top 10 and it will stay in the top 10. Replace Star Wars on the list with Hotel Rwanda and an amazing thing happens—more people rent Hotel Rwanda.