Netflix Prevails in Shareholder Lawsuit Over Subscriber Growth Projections.
Netflix successfully achieved the dismissal of a shareholder lawsuit on Tuesday, which accused the streaming service of minimizing the effects of account sharing on subscriber growth. This practice involves paying members sharing their usernames and passwords with individuals in other households who do not pay for the service.
The class action, initiated by a trustee from Texas, followed Netflix’s announcement in April 2022 that it had experienced a loss of 200,000 subscribers in the previous quarter—the first decline in ten years—and projected a potential loss of an additional 2 million subscribers in the upcoming three months.
Netflix attributed this decline to various factors, including account sharing, increased competition, and the cessation of services in Russia due to the invasion of Ukraine. Following this announcement, the company’s shares plummeted by 35%, resulting in a loss of over $54 billion in market value. U.S. District Judge Jon Tigar, presiding in Oakland, California, determined that Netflix’s previous statements regarding being “roughly 60% penetrated” in the U.S. and Canada, with “a lot of headroom” for growth, were neither false nor misleading.
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He clarified that these statements pertained to paid subscribers and did not suggest guaranteed growth. Furthermore, Judge Tigar found no evidence that Netflix had hidden any conclusions regarding the detrimental impact of account sharing on growth. He noted that the plaintiff’s claims merely indicated that the company had considered account sharing as “one potential threat to growth among many.”
The plaintiff’s legal representatives did not provide immediate comments, nor did Netflix or its legal team respond to similar inquiries. This dismissal follows an earlier rejection of a version of the lawsuit in January. The dismissal on Tuesday was with prejudice, preventing the plaintiff, Fiyyaz Pirani, trustee of the Imperium Irrevocable Trust, from amending his complaint further. The case is recorded as Pirani v. Netflix Inc et al, U.S. District Court, Northern District of California, No. 22-02672.