Netflix transitioned from a DVD rental business to a streaming business in 2008. This required moving its infrastructure to the cloud. Netflix decided to outsource capacity planning and scaling to Amazon Web Services (AWS) rather than build its own data centers. This allowed Netflix to focus on its core competency of content and applications while AWS managed the infrastructure. Netflix developed applications and services to run on AWS infrastructure and fill gaps in AWS offerings at the time. It used various AWS services like EC2, S3, SimpleDB and others to host its platform and store and access data in a scalable way. This transition enabled Netflix to grow internationally without the constraints of physical infrastructure.

1. Netflix Cloud Architecture1

2. Netflix Business Strategy
2
Remove
Late Fee
Provide
Choice from
Long Tail
Ubiquitous
Anytime
access

3. Incumbents in 1997
¨ Blockbuster, Hollywood
Videos, Movie Gallery
¤ Rented DVDs out from
prime locations
¤ Kept inventory of about
2000 titles with 3 to 4
copies of each
¤ Mostly expensive DVDs
with new movies and some
long time hits
¨ New movies typically
release to big screen and
then release via DVD
¨ DVDs rent while its new
¨ DVD availability window
is relatively small
¨ Charged late fee to
maximize turns
3
Must impose steep rental fees and steeper late fees

4. The Red Envelope (1999-2008)
¨ Removed late fee as they
saw opportunity in long tail
of DVDs
¨ Stocked 120,000 movies
mailed out from 50 hubs
¨ Matched renter interest
with a low cost movie from
the long tail
¨ Announced $1M prize:
Help find a better
recommendation algorithm
¨ 4 years and a team of
10+ PhDs solved that
¨ In 8 years, Blockbuster,
Hollywood video et. Al.
are almost out of business
4
Recommend movies in the long tail, personalized to the customer, lowering costs

5. Streaming Movies – 2008 and beyond
¨ Netflix lets users manage their DVD
queue for what they would rent next
¨ Netflix had their own problems
¤ DVD theft
¤ DVD piracy
¤ FBI involved in the US
¤ Could not grow internationally with DVD
renting model
¨ Streaming model looked very appealing
¨ Cost to stream out DVD via CDN was a
few pennies but postage is 10-100 times
more
¨ Streaming lets them grow
internationally
¨ 20M US subscribers
¨ Started streaming to US subscribers
from their datacenter
¨ Datacenter faced cooling issues and
downtime
¨ They issued customer refunds which
directly impacted their bottom line
¨ Netflix at that time was making
about 1.6 billion in revenue and had
400 employees
5

6. Netflix Decisions
6
¨ Who will manage the streaming backend?
¨ What devices will users watch streaming content on?
¨ On the client end
¤ What should be the client experience?
¤ Should Netflix create their own device?
¤ Should Netflix partner with device makers?
¤ If so, which device makers should Netflix
pursue?
¤ What about DRM to prevent piracy and
honor IP?
¨ On the cloud end
¤ Who will manage the streaming backend?
¤ Who will maintain and upkeep the data
center?
¤ How to deal with data center growth?

7. 7
Take a break from PowerPoint.
Class discusses the case.

8. On the Client End8

9. Decided against creating own device
9
¨ HDMI ports on household TVs were already
occupied by a variety of devices
¨ Introducing one more Netflix device wasn’t the best

10. Partnerships with Device makers
10
¨ Grew subscribers 2008-2010 by partnering with
device makers
¤ Game Consoles
n Xbox 360, Wii, PS3
¤ Mobile Devices
n Apple iPad, iPhone, iPod Touch, Windows Phone 7
n Android was not in this list until late 2011 (DRM concerns)

11. On the Cloud End11

12. Netflix Cloud Story
12
¨ Circa 2008, Netflix had a single data center
¤ Single point of failure (SPOF)
¤ Approaching the limits on
n Cooling
n Power
n Physical space
n Network traffic capacity

13. Netflix Cloud Story
13
¨ Strategic choices included:
¤ Build more data centers
n Manage more data centers
¤ Outsource capacity planning and scale out
n Focus on core competency

14. Netflix Cloud Story
14
¨ Winning Choice:
¤ Outsource capacity planning and scale out
n Leverage a leading IAAS provider
n Amazon Web Services
¨ In
two
years,
from
start
of
outsourcing,
Netflix
served
over
90%
traffic
out
of
AWS
¨ This
excluded
video
streaming
traffic
which
came
from
CDNs

15. How Netflix Uses AWS
15
¨ AWS provided various IAAS offering at that time
but Netflix apps needed more
• Data
SimpleDB,RDS,S3, EBS
• Load Handling
EC2, EMR, ASG, ELB
• Monitoring
CloudWatch
AWS ?
Netflix
apps

16. Netflix developers filled the gap
16
¨ Netflix developers ported Netflix platform to the AWS
AWS
Netflix
Platform
Netflix
App
Netflix Platform
• Platform.JAR
• Middle-tier Load Balancing
• Discovery
• Encryption Services
• Caching
• Configuration

17. How Netflix Used AWS
17
ELB
EC2 EC2 EC2 EC2 EC2
EC2 instances for Q EC2 instances for merch
Simple
DB S3 SQS
Edge services (such as www)
Netflix mid-tier services
(such as Q or merchandizing)
AWS IAAS
?

18. How Netflix Used AWS
18
ELB
EC2 EC2 EC2 EC2 EC2
Middle Tier Load Balancer and Discovery
EC2 instances for Q EC2 instances for merch
Simple
DB S3 SQS
Edge services (such as www)
Netflix mid-tier services
(such as Q or merchandizing)
AWS IAAS
Netflix platform

19. Netflix stack on EC2
19
Netflix Application
Platform and other infrastructure jar files
Guest OS/Virtual Machine/Host OS/Machine
Discovery client
Mid tier load balancer
Crypto Client
S3 client Simple DB client SQS client
Configuration client

20. Persistent Data: Simple DB
20
¨ Moved large transactional dataset to Simple DB
¤ Rental history info: Everything that any one has watched
on Netflix (including streaming and DVD rentals)
¨ Netflix uses Simple DB to manage
¤ Thousands of domains
¤ Over 1Tera byte of online transaction data
¤ Billions of rows of data

21. Persistent Storage: S3
21
¨ Simple key-value store organized as objects in buckets
¤ Each AWS account can create multiple buckets
¤ Each bucket can hold unlimited number of objects
¨ Netflix uses S3 to store data that does not fit into
Simple DB
¤ Logs from streaming devices
¤ Files used in movie encoding
¤ Truncated tail of rental history

22. Data Replication: Item Replicator
22
¨ IR: Item Replicator: Netflix homegrown solution
¨ Keeps data in sync between Data Center and Cloud
¤ Replication is mostly unidirectional
n Data Center to the Cloud

23. Netflix Migration to Cloud
23
¨ Netflix case is just one example.
¨ There are several cases of businesses in a variety of
industry that are migrating to the cloud

24. Questions24

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