Rental History: Netflix Settlement Leads To Changes In Privacy Policy, But Who Benefits?

For some of you this will be news, for some, a reminder. But the long and short of it is that Netflix has been forced to change its approach to user privacy, specifically in regard to how long it stores rental history for those who have unsubscribed. Netflix was forced to do so by a class-action lawsuit, which alleged that the company was illegally retaining and disclosing the personal information (browsing history, etc.) of former customers.

Netflix admitted no wrongdoing but settled the lawsuit, which grew out of a 2011 lawsuit that claimed it was in violation of the Video Privacy Protection Act, which requires companies to destroy data on their customers after a certain period (usually one year).

The news was initially reported in February by paidContent among others, in which customers had filed a lawsuit after discovering that their rental history was still available after being unsubscribed for a lengthy period of time. So, basically, knowing it has to maintain compliance with the Video Privacy Protection Act, Netflix settled rather than battle this one out.

The results? A $9 million settlement. The reason the news has come up again is because Netflix has been, as a result of the settlement, required to send out emails to all current and former subscribers alerting them to the settlement.

The email reads:

Netflix has agreed to change its data retention practices so that it separates (known as "decoupling") Entertainment Content Viewing History (that is, movies and TV shows that someone watched) from identification information for those subscribers who have not been a Netflix subscriber for at least 365 days, with some exceptions.

Furthermore, the announcement makes it clear that the $9 million settlement will go towards paying notice and settlement admin expenses, to pay attorneys' fees of up to $2.25 million, and pay a total incentive award of $30K to the named plaintiffs. Again, the policy change was officially announced to current and former users beginning yesterday. That comes from the organizers of the suit, who have set up a website at videoprivacyclass.com.

As is typical with these kinds of lawsuits, the website is pretty unhelpful and could make it much easier to determine how users can either object to this settlement, exclude their names from the settlement, etc.

So, why should you care?

Well, for starters, let's be clear: Netflix was never shown to have done anything illegal, and this lawsuit is solely concerned with those people who left Netflix. But, as one may remember, Netflix lost a lot of customers last year as a result of its pricing change (among other things). Today, Netflix has some 24 million domestic streaming customers, with more coming internationally as it builds out its global footprint, and thus far, we've seen fairly high turnover. There are tons of people who leave Netflix for good, some who leave and go back, etc. etc. The point is: Over time, this effects a lot of people.

Now, you may not care if Netflix was storing your browsing history, and you may even have been thankful knowing that, if you left Netflix and came back three months later, it would still remember your taste preferences. Netflix itself certainly expected that would be the case.

But the other way to look at this is that, in the end, many people believe that it's not in their best interest to have personal information stored about you — especially if you don't know that a company or service is storing information and you did not give it explicit permission to do so.

For the end user, many of us would agree that this kind of stuff should always be opt-in, never be default. Look at what happened to Path. But the thing is that, most of the time, it's not in a company's best economic interest to do that. So, even if we all admit that, in this case, a violation was small, it's still worth bringing attention to because it sends a clear signal that companies need to be more transparent in how they handle (and what they do) with our information. Looking the other way would be a passive affirmation that this is okay.

What's more, as TechDirt and others pointed out, this could also just be another example of how ludicrous class-action lawsuits in this country can be.

Essentially, while Netflix admits no wrongdoing, it's going to be doling out $9 million. But, unless you're one of the two named plaintiffs (Jeff Milans and Peter Comstock, who will split the $30K), the majority of the money goes to charity, but $2.25 million goes to the lawyers.

So, if Netflix has in some way "wronged" its customers (even though it says that it hasn't), it seems ridiculous that the lawyers walk away with over $2 million, while those that have apparently been "hurt" by their actions receive absolutely nothing. As The Wise Guys noted, scores of customer names were used to win millions of dollars for the attorneys and unnamed non-profit organizations, yet they receive nothing. With the exception of the attorneys, as it stands now, how is this a victory for anyone involved?

Granted, class-action lawsuits of this kind are geared less towards winning restitution for those apparently "harmed" and more towards teaching the companies in question a lesson by stinging them right in their wallet, and hopefully will serve as incentive for companies to change the way they do business, but will it?