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Netflix Cancels Eponymous ‘Prize’

12 Mar, 2010 By: Erik Gruenwedel

Citing the need to protect the privacy of its subscribers, Netflix March 12 said it would not hold a sequel to its widely publicized Netflix Prize following the settlement of a lawsuit and federal inquiries on privacy issues surrounding data used in the competition.

The $1 million challenge, bowed in 2006, invited computer scientists (or anyone) to improve the Los Gatos, Calif.-based online DVD rental pioneer’s movie recommendation software by at least 10%.

More than 40,000 teams from 186 countries took on the challenge, with a team composed of previous entrants in 2009 eventually able to best by 10% the predictions of Netflix subscribers based on 480,000 anonymous ratings made available by the company.

It was the availability of that data — including reportedly subscriber zip codes and gender for the follow-up contest — to third-party researchers that prompted a lawsuit and reaction by the Federal Trade Commission (FTC).

Indeed, in a letter to Netflix lawyers, the FTC said a published report by two University of Texas researchers outlining how data used in the Netflix Prize could identify individual subscribers and their movie tastes had prompted the federal government’s concern.

The FTC said that based on a serious of “productive” discussions with Netflix personnel and the company’s subsequent suspension of a second contest, had resulted in the agency closing its investigation.

Neil Hunt, chief product officer for Netflix, writing on the company’s corporate blog, confirmed the service had reached an understanding with the FTC and settled the lawsuit with plaintiffs.

Financial terms of the settlement were not disclosed.

“The resolution to both matters involves certain parameters for how we use Netflix data in any future research programs,” Hunt wrote.

Hunt said Netflix would continue to explore ways to collaborate with the research community to improve its service without releasing subscriber data publicly.

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