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As 2012 comes to a close, Netflix (NASDAQ:NFLX) finds itself caught in the sway of two important trends in the technology sector: the increasing politicization of technology and the growing link between technology, entertainment, and social media.
How have politics and social media affected Netflix this year?
On December 9, the House of Representatives passed an amendment to the 1988 Video Privacy Protection Act, giving Netflix the ability to integrate its video and instant queue data with popular social networks like Facebook (NASDAQ:FB), permitting users to share their video-rental histories online. The updated version of the law will be of significant benefit to Netflix, as the new disclosure provisions allow users to promote the service by sharing their viewing habits with social network contacts.
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Netflix campaigned vigorously in favor of the bill, spending approximately $1 million on lobbyists in the past two years and forming its own political action committee called FLIXPAC in April. Upon its formation, the company made issues like net neutrality, the Video Privacy Protection Act, and bandwidth caps a high priority on the PAC’s agenda, according to the technology news publication The Next Web.
CHEAT SHEET Analysis: How will the political trend affect Netflix in 2013?
One of the core components of our CHEAT SHEET Investing Framework explains that companies riding macro trends tend to outperform those that don’t. Think of the investing proverb, “A rising tide raises all boats.”
As technology has become an increasingly important and dominant factor in day-to-day life, its entrance into the political realm was inevitable. To keep abreast of competition Netflix has turn to the legislative process, highlighting the fact that policy is an important tool for technology companies. With its most recent lobbying efforts a success, the company is expected to turn its attention to upholding network neutrality, which dictates that government regulations prevent Internet service providers from restricting bandwidth use. Because the company now represents the largest source of Internet traffic in North America, with 28.8 percent, ISPs have found the company’s use of bandwidth problematic.
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