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Netflix Wanting Facebook Link Seeks to Ease Disclosure Ban

By Eric Engleman
October 13, 2011 11:42 AM EDT
Netflix Wanting Facebook Link Seeks to Ease Disclosure Ban
Netflix Wanting Facebook Link Seeks to Ease Disclosure Ban

During the 1987 battle over Robert Bork’s U.S. Supreme Court nomination, a Washington tabloid published Bork’s video rentals. The next year, Congress banned such disclosures without customer consent.

That two-decade-old law is now the target of lobbying by online video provider Netflix Inc. (NFLX), which says the measure is blocking its deal with Facebook Inc. to let U.S. customers link their Netflix accounts to the world’s largest social network and share movies and television shows with friends.

Today, the House Judiciary Committee approved a Netflix- backed bill that would revamp the 1988 Video Privacy Protection Act to allow consumers to provide one-time online consent to release rental data, paving the way for U.S. implementation of the Facebook deal. Netflix rose 2.2 percent to $116.17 in Nasdaq trading at 11:40 a.m. New York time.

“Netflix would benefit immensely from Facebook,” Richard Greenfield, an analyst at BTIG LLC in New York, said in a research note yesterday. “Given the consumer goodwill/brand damage Netflix has inflicted on itself in the past few months, domestic Facebook integration appears more important than ever for Netflix.”

Netflix is grappling with fallout from recent moves to raise prices and split its mail-order DVD and Internet-streaming services. The Los Gatos, California-based company on Sept. 15 cut its domestic subscriber estimates for the third quarter by 1 million, and on Oct. 10 it retreated from the decision to separate the DVD and online streaming services. Netflix shares had fallen 62 percent in three months through yesterday, down from $298.73 on July 13.

Lobbying Increase

Netflix has increased its lobbying in Washington this year, spending $190,000 during the first six months of 2011, compared with $130,000 spent for all of last year, according to reports filed with the U.S. Senate.

The company hired Michael Drobac as its first full-time lobbyist last October. Drobac previously represented the online travel service Expedia Inc. (EXPE) and IAC/InteractiveCorp. (IACI), which runs the dating website Match.com and other Internet businesses. He has also served as an aide to Republican lawmakers, including Senator Kay Bailey Hutchison of Texas and former U.S. Senator Norm Coleman of Minnesota.

Between April and June, Drobac made $4,000 in political donations to four House members, according to the Center for Responsive Politics, a Washington research group. Recipients included Bob Goodlatte, a Virginia Republican who introduced the bill, and Linda Sanchez, a California Democrat and a co-sponsor.

Friending Facebook

Drobac also gave to House Speaker John Boehner, an Ohio Republican, and Mary Bono Mack, a California Republican who chairs a House Energy and Commerce subcommittee that has focused on online privacy issues.

The Facebook partnership with Netflix is part of the social network’s effort to become an entertainment destination by giving its more than 800 million users new ways to share music and movies. For example, under the changes unveiled Sept. 22 by Facebook Chief Executive Officer Mark Zuckerberg, members can use the site to play songs their friends are listening to through deals with online music services such as Spotify Ltd.

Netflix CEO Reed Hastings, a member of Facebook’s board, took part in last month’s announcement, and said Netflix members in the U.S. wouldn’t be able to share their favorite movies on Facebook because of the “outdated privacy law.” He said the Netflix-Facebook integration would be available in the 44 other countries where Netflix operates.

In a blog post that same day, Drobac, the Netflix lobbyist, encouraged consumers to e-mail lawmakers in support of the House measure to change the law.

Privacy Implications

The bill “will spur growth and innovation for our business and industry by allowing Netflix and others to offer the kinds of new features and services that today’s consumers continue to expect and enjoy,” Drobac said in an e-mail.

Privacy advocates are divided on the measure. Marc Rotenberg, executive director of the Washington-based Electronic Privacy Information Center, urged lawmakers to hold a hearing before changing the law, saying it provides some of the strongest consumer-privacy protections in the U.S.

“Why gut the one federal privacy law that actually provides users with some rights?” Rotenberg said in an e-mail. Congress should look at Facebook’s policies, which “provide no meaningful privacy protections,” he said. Rotenberg’s group last month asked the Federal Trade Commission to examine whether Facebook tracks users after they log off the website.

‘Driver’s Seat’

Jim Dempsey, vice president for public policy at the Center for Democracy and Technology, another Washington-based privacy group, said he didn’t see a problem with the proposed changes.

“A basic premise of privacy is that the consumer should be in the driver’s seat,” Dempsey said in an interview. “If they want to share their music listening habits or their movie viewing habits, they should have the option to do that, if it’s clear and easy to change their mind.”

The House bill, H.R. 2471, was approved on a voice vote today by the Judiciary Committee. The Senate has yet to put forth its own version of the measure.

Last week, Facebook, Google Inc. (GOOG) and IAC/InterActiveCorp. (IACI) joined Netflix in urging committee members to approve the bill. The law was enacted when “many of the technologies consumers use today had not been invented,” the companies wrote in an Oct. 6 letter to the panel’s chairman, Texas Republican Lamar Smith, and its top Democrat, John Conyers of Michigan.

Facebook spokesman Andrew Noyes, Google spokeswoman Mistique Cano, and IAC spokeswoman Stacy Simpson said they had no comment beyond the letter.

Bork’s ‘Dull’ Life

Robert Bork, 84, the one-time Supreme Court nominee whose leaked video-rental history sparked enactment of the 1988 law, said the statute “may need revision.”

“I would hope that the privacy of the individual would be preserved,” Bork said in a telephone interview from his home. “I suppose if they can find a way to preserve privacy under the statute I wouldn’t object.”

The report on his video-store rentals of movies including “The Man Who Knew Too Much” by the Washington City Paper in the fall of 1987 was a sideshow in a bruising nomination fight that ended in Bork’s defeat after Senate Democrats and liberal groups accused him of threatening the rights and privacy of Americans.

Now a distinguished fellow at the Hudson Institute, a policy research organization in Washington, Bork said he’s “never seen” Facebook and hasn’t studied issues related to the online sharing of movies and other entertainment.

“My life is kind of dull,” he said.

To contact the reporter on this story: Eric Engleman in Washington at eengleman1@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net

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