Netflix-Facebook Link Stalls as Franken Favors Bork Law

Netflix-Facebook Link Stalls as Franken Favors Bork Law: Tech

U.S. Senator Al Franken has helped
stymie a potentially lucrative partnership between Netflix Inc.
and Facebook Inc. in a dispute with roots all the way back to
Judge Robert Bork’s Supreme Court nomination.
In 1987, a newspaper published Bork’s video-store rentals
during contentious hearings over the nominee. Even though it
wasn’t very explosive material — he’d rented “The Man Who Knew
Too Much” — Congress passed the Video Privacy Protection Act
the next year to ensure that never happened again.
Now, Netflix is trying to change the law. A measure backed
by the Los Gatos, California-based video provider would let
customers give one-time online consent to share the titles of
movies they watch. Franken, joined by privacy advocates, is
skeptical of allowing blanket permission and said consent should
be handled on a case-by-case basis.
“It’s a really good thing that people can easily tell
their video company, ‘Sure, go ahead and tell people I watched
The Godfather, but no, don’t tell them I watched Yoga for
Health: Depression and Gastrointestinal Problems,’” Franken, a
Minnesota Democrat, said at a Jan. 31 hearing on the bill.
Netflix is looking to add customers as it faces increasing
online video competition from companies including Amazon.com
Inc., Hulu LLC, and Verizon Communications Inc. Verizon formed a
joint venture this month with Coinstar Inc., owner of the Redbox
video rental service, to offer a Web streaming service.
The partnership with Facebook offers Netflix the promise of
access to the social network’s 845 million users and has taken
effect in 46 countries where Netflix operates. It has been
blocked in the U.S. by the Bork-era law, Netflix said.

Video Competition

Under the agreement, people can connect their accounts on
the two services; every time a user streams a movie or TV show
on Netflix, the title appears on the user’s Facebook page.
The ability to connect streaming with social activity on
Facebook would be a “great way to drive subscriber acquisitions
and highlight content that people didn’t even know existed
within the service,” Richard Greenfield, a media analyst at
BTIG LLC in New York, said in an interview.
Netflix Chief Executive Officer Reed Hastings, a member of
Facebook’s board, said in September, when the companies’ deal
was announced, that Netflix members in the U.S. wouldn’t be able
to share their favorite movies on Facebook because of the
“outdated privacy law.”
Netflix boosted its lobbying spending more than six-fold in
2011 from the previous year as it pressed for passage of a bill
to clear the way for U.S. implementation of the Facebook deal.

Rental Stores

Facebook joined Netflix along with Google Inc. and
IAC/InterActiveCorp. in urging U.S. lawmakers to change the
Video Privacy Protection Act in an Oct. 6 letter to leaders of
the House Judiciary Committee.
The 1988 law was enacted when people watched videocassette
tapes from brick-and-mortar rental stores and “many of the
technologies consumers use today had not been invented,” the
companies wrote in the letter addressed to Representative Lamar
Smith, a Texas Republican and the committee’s chairman, and John
Conyers of Michigan, the panel’s top Democrat.
The proposed bill “empowers consumers to make decisions
about how they wish to share their experience on social networks
and content sites such as Netflix, Facebook, and Google,” the
companies wrote.
A revision backed by the company won House passage in
December in a 303-116 vote. The bill’s momentum slowed at a
Senate hearing last month as Senators Franken and Tom Coburn, an
Oklahoma Republican, questioned whether the one-time consent
favored by Netflix would unravel consumer privacy protections.

Privacy Protection

Franken will use testimony from the Jan. 31 hearing to
determine how to revise the 1988 law “to protect the privacy of
consumers who use Netflix and other web-based video services,”
Alexandra Fetissoff, a spokeswoman for the senator, said in an
e-mail, without detailing any plans.
The Senate Judiciary committee has scheduled no further
action on the issue, spokeswoman Erica Chabot said in an e-mail.
The fate of the Netflix-backed bill marks a test of the
company’s nascent lobbying operation in Washington. Netflix
hired Christopher Libertelli, a former lobbyist for Skype
Technologies SA and senior legal adviser at the Federal
Communications Commission, late last year. Libertelli replaced
Michael Drobac, Netflix’s first full-time lobbyist, who was
brought on in October 2010.

Lobbying Expenditures

Netflix spent $500,000 on lobbying in 2011, according to
U.S. Senate records. The company registered to lobby in late
2010, and spent $80,000 on lobbying that year, the Senate
records show.
Facebook filed this month to raise at least $5 billion in
the largest Internet initial public offering on record. The
company is considering a valuation of $75 billion to $100
billion, people with knowledge of the matter said.
Andrew Noyes, a spokesman for Facebook in Washington,
declined to comment on the legislation.
Netflix was up 76 percent this year as of Feb. 17, more
than any other company in the Standard & Poor’s 500 Index. The
video provider forecast improving margins last month, and said
it had contained a subscriber revolt over price changes and an
aborted plan to split its mail-order and Internet-streaming
businesses.
David Hyman, Netflix general counsel, said in an e-mail,
“In many ways social media is the new water cooler for
consumers and we think it may be a great source for our members
to find movies and TV shows they will love.”
Hyman said more than 500,000 Netflix subscribers outside
the U.S. have connected their accounts with Facebook to share
movies with friends.
“We would like our U.S. members who so want to engage with
social media to be able to do the same and am hopeful that the
Senate will clear some regulatory underbrush to make this
happen,” he said.