The Netflix $1,00,000 prize to the team able to increase the accuracy of its recommendation system by 10% is nearly sure to be awareded to BellKor's Pragmatic Chaos, a super-team of 4 teams that today claimed to have reached the 10.5% mark.
Tracking the Netflix prize has been fascinating. Back in November 2008, one of the leaders, who was at the time 8.8% better than Netflix's own Cinematch, estimated that the movie Napoleon Dynamite alone accounted for 15% of his remaining error rate. Why? Because people either love it or hate it; it has received nearly exlusively 1 or 5 stars and it is nearly impossible to predict whether or not someone will like it based on his past history.
Netflix did right opening up the competition to the public. It inspired teams around the country -- from AT&T engineers to father-son teams -- and the 10% increase will be worth well more than only $1M to the company.
This is one of the best examples of crowdsourced innovation and problem-solving out there. The winning team was initially 4 disparate pairs or individuals who they realized that they had complementary skills -- machine learning, computer science, engineering -- and decided to collaborate. Throughout the competition, as the market leaderboard tracked the top performers, teams would routinely share lessons learned. Even with $1M at stake, the market can indeed be collaborative and come to a better solution than a single company alone.