Privacy Concerns Nix $1 Mln Netflix Prize

netflix gives 1 million prize to bellkors pragmatic chaos 2 big

Remember last year when Netflix awarded $1 million to the research team BekllKor’s Pragmatic Chaos for improving the service’s movie recommendation system by 10 percent? The contest, which had been running for about a year, was designed to spur independent researchers into finding new ways to recommend movies customers would like based on their previous rentals and ratings of other movies by customers with similar viewing habits. As soon as Netflix awarded the $1 million prize, it immediately announced a second Netflix Prize: $1 million to the team that can most improve movie recommendation accuracy for members who don’t rate movies often (or at all).

Now, Netflix has called off the second Netflix Prize contest, owing to a lawsuit and Federal Trade Commission inquiry over customer privacy concerns the contest raises. Netflix has intended to let competitors have access to movie rental data without any names or other identifying information associated with the, but a lawsuit filed by KamberLaw LLC maintained that wouldn’t be enough to maintain customers’ privacy…and the FTC had raised concerns about protecting customers’ privacy. In calling off the contest, Netflix settles the potential lawsuit, and staves off any formal action by the FTC.

“We have reached an understanding with the FTC and have settled the lawsuit with plaintiffs. The resolution to both matters involves certain parameters for how we use Netflix data in any future research programs,” Netflix’s Chief Product Officer Neil Hunt wrote in the company blog. “In light of all this, we have decided to not pursue the Netflix Prize sequel that we announced on August 6, 2009.”

The class action suit brought by KamberLaw maintained that both the first and second Netflix Prize contests violated federal law that prohibits video rental companies from sharing their customers’ movie rental histories. The suit was bolstered by two researchers at the University of Texas who claimed they were able to identify some specific Netflix customers using data supplied to researchers for the first Netflix Prize contest.

The settlement does not prevent Netflix from working with the research community on ways to improve its recommendation service, and Netflix says it plans to continue to look for ways to improve its technology.

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