Bloomberg News

Netflix-Backed Bill on Video Disclosure Clears House Panel

October 13, 2011

(Updates with share price in third paragraph.)

Oct. 13 (Bloomberg) -- The House Judiciary Committee approved legislation today backed by Netflix Inc. that would ease a 1988 law barring disclosure of movie-rental information without a customer’s written consent.

Netflix says the two-decade-old law predates many of the technologies popular with consumers today, including online video, and stands in the way of an agreement signed last month with Facebook Inc. that would make it easier for subscribers of both services to share their favorite movies.

The House bill, H.R. 2471, passed the committee in a voice vote. The measure would let consumers give one-time online consent to release their rental data, paving the way for U.S. implementation of the Facebook deal. Netflix rose 2.5 percent to $116.28 in Nasdaq trading at 12:06 p.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.”

The vote comes at a crucial moment for Los Gatos, California-based Netflix, which is grappling with the fallout from recent moves to raise prices and split its mail-order DVD and Internet-streaming services. The company on Sept. 15 cut its projected domestic subscriber numbers for the third quarter by 1 million, and it retreated on Oct. 10 from the decision to separate its DVD and online streaming services.

Facebook Deal

Netflix’s partnership with Facebook is part of the social network’s effort to become more of an entertainment destination. Under changes unveiled Sept. 22 by Facebook Chief Executive Officer Mark Zuckerberg, members can use the site to play their friends’ favorite songs through deals with online music services such as Spotify Ltd.

Netflix CEO Reed Hastings, a member of Facebook’s board, took part in the announcement, but said Netflix members in the U.S. wouldn’t be able to share their favorite movies on Facebook because of the “outdated privacy law.”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.

The House bill would change the Video Privacy Protection Act, which was enacted after rental records of then-Supreme Court nominee Robert Bork were published in the fall of 1987 by a Washington tabloid. The Senate has yet to introduce its own version of the measure.

Letter to Lawmakers

Last week, Facebook, Google Inc. and IAC/InterActiveCorp. joined Netflix in urging the Judiciary Committee to approve the bill. The measure “empowers consumers to make decisions about how they wish to share their experience on social network and content sites,” the companies wrote in an Oct. 6 letter to the committee’s chairman, Texas Republican Lamar Smith, and its top Democrat, John Conyers of Michigan.

“People are socializing on the Internet in ways that were unimaginable then,” Netflix spokesman Steve Swasey said in an interview. The original video-privacy law is “from a previous era and it’s not relevant now,” he said.

--With assistance from Cliff Edwards and Brian Womack in San Francisco and Ronald Grover in Los Angeles. Editors: Michael Shepard, Allan Holmes

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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