Netflix withheld the sharing tool in the U.S.to avoid breaking a 1988 law that banned the disclosure of video rental records without a customer's written consent. After several years of lobbying, the Lost Gatos, Calif., company persuaded Congress to revise the law so that subscribers could choose to activate a video-sharing feature.
President Obama signed the amended law in January, clearing the way for Netflix to offer U.S. subscribers another way to find movies and TV shows that may appeal to their tastes. In the process, Netflix hopes to deepen subscriber loyalty and generate positive buzz about the $8-per-month service as the company strives to reach its goal of reaching 90 million customers.
"This has been a missing link for us," said Tom Willerer, Netflix's vice president of product innovation. "Being able to see more recommendations from your friends can be a very powerful thing."
Investors apparently believe the new feature will increase Netflix's popularity and, by extension, its profits. Netflix shares stock surged by $10.25, or 5.6 percent, to close at $192.36.
The sharing tool could backfire if it raises privacy concerns as subscribers discover how much their Facebook friends are finding out about their viewing preferences.
Netflix is trying to make sure that happens by corralling the sharing within individual subscriber accounts when the feature is first turned on. The company plans to offer all its U.S. subscribers the option by the end of this week.
Once the sharing feature is activated, new rows labeled "Friends' Favorites" and "Watched by your friends" will be displayed within a subscriber's account. On the flip side, any subscriber who has signed up for Facebook sharing will have their movie selections displayed with the accounts of their Facebook friends unless an extra step is taken to exclude a specific movie or TV show. What subscribers are watching won't be posted on Facebook's social network unless they go into their setting to permit the sharing on that website, too.
Beside the general rows of recommendations, Netflix will also devote rows to the watching lists of up for five Facebook friends that the company's computer formulas will select, based on an analysis of common interests. Netflix eventually hopes to allow subscribers to designate the Facebook friends whose video opinions that they like the most, Willerer said.
In households where multiple people share the same Netflix account, the sharing option will be tied to the Facebook account of the primary subscriber. Netflix is currently testing technology that allows several people using the same Netflix account to splinter into individual profiles that sorts their viewing histories into different queues. If the experiment is successful, Willerer said Netflix may add more ways to share video recommendations under the same account.
Netflix's new Facebook-share option
WHAT SHOULD WE WATCH TONIGHT? • Netflix says its 27 million streaming video subscribers in the U.S. will now be able to see what their Facebook friends are watching as long as they're willing to share their viewing preferences too.
LEGAL BREAKTHROUGH • The sharing tool announced Wednesday follows a change to a U.S. law that had prevented the disclosure of video records without written consent. Netflix Inc. launched the Facebook-sharing option for its international customers 18 months ago.
DVDS EXCLUDED • Netflix isn't offering the Facebook-sharing tool to the 8.2 million that subscribe to its steadily shrinking DVD-by-mail rental service.