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Netflix Pays out $9M for Class-Action Lawsuit, Changes Privacy

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A class-action lawsuit took streaming video giant Netflix to task for its privacy policy, leading to an out-of-court settlement and a policy change.

Former Netflix subscribers filed a class-action lawsuit against Netflix in California's Northern District Court, San Jose Division, on July 5 of this year, alleging that the service kept and disclosed viewing histories for former subscribers for too long a period. The U.S. Video Piracy Protection Act mandates how long companies can keep such data. Moreover, Netflix was alleged to have disclosed viewing histories to unnamed third-party companies.

As part of its settlement, Netflix didn't admit to any wrongdoing, but it did pay out $9 million. After a generous $2.25 million in attorney fees and $5,000 each for named plaintiffs only, the rest of the payout will go to unnamed privacy advocacy groups.

Netflix is also changing its privacy policy. Now, customers whose memberships ended at least a year ago will no longer be associated with their viewing histories in Netflix's system.

According to the lawsuit, Netflix had been using information on former subscribers for marketing and advertising purposes.

In all, it's not a great week at Netflix. Beside the payout, research company TDG just reported that Netflix is experiencing a sharp decline in subscriber approval ratings, with highly satisfied subscribers declining 29 percent in the past year. TDG blames this on lingering resentment from Netflix's previous service and price changes.

At least if those subscribers become former subscribers, they won't have to worry about their viewing histories being stored for long.

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