Giving in to privacy concerns on Friday, the DVD-by-mail service Netflix Inc. said that it had decided to terminate its plans of a sequel to its last year’s knock out - the $1 million movie-recommendation contest.

Netflix’s retreat of the hit contest largely implies the company’s settlement of a lawsuit filed by KamberLaw L. L. C. – which alleged that Netflix intended to release millions of movie-rental records; thereby illegally disclosing sensitive information pertaining to the preference and lifestyles of its subscribers.

Though the first contest was a research and business hit, University of Texas researchers pointed to one unforeseen drawback of the contest - that the purportedly anonymized statistics released for the contest could actually be used to identify the countless customers, who had revealed their movie recommendations and choices.

With the privacy concerns also drawing the attention of the Federal Trade Commission (FTC), Netflix said on Friday the agency had expressed its apprehensions about the company’s ability to protect the privacy of its customers.

Saying that the company had “reached an understanding” with the FTC to settle the lawsuit, Netflix’s chief product officer Neil Hunt said: “The resolution of both matters involves certain parameters on how we use Netflix data in any future research programs.”

Hunt also added that Netflix will sustain its endeavors to “explore ways to collaborate with the research community” to better its recommendation system.