To win the prize, announced Monday, a contestant will have to devise a system that is more accurate than the company's current recommendation system by at least 10 percent. And to improve the quality of research, Netflix is making available to the public 100 million of its customers' movie ratings, a database the company says is the largest of its kind ever released.
Recommendation systems, also known as collaborative filtering systems, try to predict whether a customer will like a movie, book or piece of music by comparing his or her past preferences to those of other people with similar tastes. Such systems will look at, say, the last 10 books, movies or songs a customer has rated highly and try to extrapolate an 11th.
Computer scientists say that after years of steady progress in this field, there has been a slowdown, which is what Netflix executives say prompted them to offer the problem to a wide audience for solution.
"If we knew how to do it, we'd have already done it," said Reed Hastings, chief executive of Netflix, based in Los Gatos, Calif. "And we're pretty darn good at this now. We've been doing it a long time."
Nobody with the company will be eligible to compete, Netflix said, so that it does not appear that the contest favors insiders.
James Bennett, the vice president for recommendation systems, said the company had taken great pains to preserve the anonymity of the 100 million movie ratings it was making available to researchers, even consulting with privacy experts to make sure that the ratings could not be traced to individual Netflix customers.
"The data set is the big deal here," Bennett said.
Netflix has already used its data set to test the accuracy of its existing recommendation system, so it will be able to gauge the accuracy of each entrant's set of predictions, executives said.
Hastings said he thought it was important to make the ratings database widely available. "Unless you work at Microsoft research or Yahoo research or for Jim Bennett here at Netflix, you won't have access to a large data set," he said. "The beauty of the Netflix prize is you can be a mathematician in Romania or a statistician in Taiwan, and you could be the winner."
John Riedl, a professor of computer science at the University of Minnesota and a pioneer in the field of collaborative filtering, said that Netflix and Amazon now had the most advanced recommendation systems.
"Most of the easy stuff has been squeezed out already," he said, adding that it had become increasingly difficult to make substantial progress in predicting accuracy.
"Any time you start working on any of these scientific or engineering problems, there's a period of dramatic improvement," Riedl said. "It slows down because in a sense you're competing with 15 years of really smart people banging away at the problem."
Until now, researchers who have been working to improve recommendation systems have been relying on a much smaller database, a set of one million ratings generated by a Web site called MovieLens, Riedl said. "Having a big data set would be really, really useful," he said.
Francisco Martin, the chief executive of Mystrands.com, a company in Corvallis, Ore., that is developing a recommendation engine based on what people listen to on iTunes, agreed, saying, "With ratings-based systems, you need to rate everything you see in order to get reasonably accurate recommendations."
Cash prizes in other difficult technical areas have been offered in recent years. In 2004, there was the $10 million Ansari X Prize for a reusable spacecraft. The Defense Advanced Research Projects Agency is again running a contest involving robotic vehicles with the first prize $2 million. And NASA is offering prize money ranging from $200,000 to more than $5 million for building equipment including lunar excavators and solar sails--large mirror-based equipment intended to collect solar power and conserve rocket fuel.
Hastings said the Netflix prize was different from some others in that it required a minimal financial investment to compete. "This will be one of the largest truly open prizes that's ever been done," he said. "All you need is a PC and some great insight." He said Netflix would publish a detailed description of the winning approach.
If no one wins within a year, Netflix will award $50,000 to whoever makes the most progress above a 1 percent improvement, and will award the same amount each year until someone wins the grand prize.
Riedl noted that a big improvement in Netflix's recommendation system would be a boon to the company's business. "It could result in a significant rise in sales if the recommendations do a better job of helping people find movies they want to see," he said.