In Mark Randolph's book he talks about how Netflix would recommend content (DVDs at the time) to strategically fit Netflix's needs. For example, if they didn't have a copy of a movie ready to send out, Netflix wouldn't recommend it.
Now a days, I'm certain Netflix recommends content to feature either "no cost" (owned) or the content with the lowest licensing fee. I don't believe for a second they don't have the data suggest the best movie. They simply don't want to suggest the best movie. As you said, their goal (now) isn't to suggest the content the user is likely to enjoy most, it's to suggest content the user will tolerate. And that's exactly why they shifted away from a 5 star rating system, to a thumbs up/down approach... even if you didn't love a movie or show, you're still likely to give it a thumbs up unless it was totally awful.
Now a days, I'm certain Netflix recommends content to feature either "no cost" (owned) or the content with the lowest licensing fee. I don't believe for a second they don't have the data suggest the best movie. They simply don't want to suggest the best movie. As you said, their goal (now) isn't to suggest the content the user is likely to enjoy most, it's to suggest content the user will tolerate. And that's exactly why they shifted away from a 5 star rating system, to a thumbs up/down approach... even if you didn't love a movie or show, you're still likely to give it a thumbs up unless it was totally awful.