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Netflix sued for allegedly misleading on content deals

updated 10:45 am EST, Tue January 17, 2012

Netflix sued over reporting false information

Movie streaming and rental-by-mail service Netflix has been named in a class-action lawsuit for reportedly hiding decreases in its subscriber base and releasing false information about contracts with content providers. The lawsuit was filed on the behalf of institutional investors at the City of Royal Oak Retirement System.

Specific statements from Netflix under attack cover the time between December 20, 2010 and October 24, 2011. Investors say the company's stock was artificially inflated because it reportedly didn't consider rising costs and rapid subscriber defections. This was the same time period during which Netflix briefly split its business into a streaming service and a DVD subscription service called Qwikster. After users didn't take to it, it backtracked on the Qwikster idea. It also raised prices for those who wanted both discs and streaming by 60 percent.

Plaintiffs further claimed that Netflix hid the trend of content providers wanting higher license fees, which would drive prices up, and that it wasn't likely to meet earnings forecasts. [via Hollywood Reporter]




by MacNN Staff

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