Another Netflix Debacle?

Posted by · February 1, 2012 1:47 pm

They were doing so well. After a nightmarish year, Netflix let the waters calm, kept a low profile, and even had some good news from the fourth quarter to springboard them into 2012. But tragically, as with all good things (or so it seems), this, too, must come to an end.

No, it’s not another price hike. Qwikster isn’t making another appearance (and disappearance). But much like these epic fails that plagued the company to the point of a $200 million stock selloff last year, the latest move by Netflix could prove equally, if not more disastrous.

In its earnings release last Wednesday, Netflix announced its dedication to the effort to “modernize and simplify” the Video Privacy Protection Act. Passed in 1988, the act was signed into law in response to an effort to prevent Supreme Court nominee Robert Bork from being confirmed by publishing his video rental history. To prevent such unsolicited disclosures from happening again, the law holds any “video tape service provider” liable for up to $2500 in damages when rental information—other than when necessary for standard business practices—is disclosed. Since then, the scope of the act has been broadened to include rental records for DVDs, video games and other general forms of video content.

The reason Netflix is spearheading this so-called modernization effort? One word: Facebook.

That’s right. In order to maximize exposure, Netflix has developed a Facebook app that is yet to roll out in the U.S. because of the 1988 law. What the app does is display viewing activity in the news feeds of that particular user’s Facebook friends. With the app, Netflix hopes to secure its place among the influx of ad-like status updates from Facebook’s Open Graph apps that have begun to inundate news feeds site-wide and, as a result, have made the social site a lot less, well, social.

In order to get around the VPPA and into users’ news feeds, Netflix has set out to amend the legislation with a bill of its own. Though hardly mentioned in the press, H.R. 2471—occasionally referred to as the “Netflix bill”—would allow Netflix to get “informed, written consent” (via the Internet, of course) from users to plaster user activity across the largest social network in the world.

Reacting to the amendment’s passage in the House, Electronic Privacy Information Center (EPIC) Executive Director Marc Rotenberg testified before the Senate Judiciary Committee to provide his perspective on how he thinks the law ought to be renovated. Those recommended changes include the introduction of new language that leaves no doubt that all video service providers—in this case, Netflix—are covered by the VPPA. Rotenberg also recommends that users be permitted to view the information that providers collect and the means by which such information is gathered. Furthermore, the EPIC Executive Director wants Congress to include IP addresses and user IDs within the purview of “personally identifiable information”, the amount in damages (currently $2500) to be adjusted for inflation, and for covered companies to be mandated to keep all user information encrypted.

Clearly the modernization that EPIC is suggesting runs directly contrary to the desires of Netflix, who hopes to further dull the teeth of the 1988 act with its own amendment.

Who will ultimately win in the end? Time will only tell; however, the not-so-distant past does hold a few clues as to how effectively an informed public can stop such controversial legislation dead in its tracks.

If the last couple weeks have proven anything, it’s that those in favor of preserving Internet freedom and personal privacy know how to deliver an Internet-based protest of historic proportions. Look a bit further into the past and it becomes clear that, should this issue get enough press, a Netflix looking to get back into the good graces of potential users wouldn’t have half the stamina of that displayed by the Hollywood lobbyists who fought tooth and nail trying to get SOPA and PIPA passed.

In a world where there’s a record for just about everything someone does, the last thing people need is another hole punched in an already porous piece of legislation whose sole purpose is to prevent companies from disclosing their records. As the ACLU’s Christopher Calabrese put it, “Privacy isn’t just about protecting us when we have something to hide; it’s recognizing that the American default is ‘leave me alone’.”

To avoid yet another tough year, it might be in Netflix’s best interest to keep that default in mind.

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