Los Gatos,
– Online DVD rental
service Netflix (NASD:  NFLX) has settled a lawsuit related to the disclosure of customer
data for its Netflix Prize contest for developers, and announced that it will
abandon plans to host a sequel to the contest. The first contest awarded $1
million to developers who were able to improve the accuracy of Netflix’s movie
recommendations feature by 10%.

At the time the award was presented, Netflix announced
a sequel contest that would see the company provide developers with what it
said was anonymous usage data from its subscribers.

After academic research found that the company may have unwittingly disclosed the renting preferences of its users, Netflix says the
Federal Trade Commission (FTC) came asking questions about how the
disclosure might affect customers’ privacy, and a class action lawsuit was
filed against the company over the matter.

"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 chief product officer Neil
Hunt wrote in a post on the company’s blog.

"In light of all this, we have
decided to not pursue the Netflix Prize sequel that we announced on August 6,


Related Links:

(Netflix blog)
(DMW previous coverage)