Disgruntled Netflix shareholders sue over subscription disclosures

Shawn Knight

Posts: 14,136   +154
Staff member
What just happened? A group of Netflix shareholders have filed a lawsuit against the streaming giant accusing the company of misleading investors as it relates to slowing subscriber growth. The suit, filed by a Texas-based investment trust in San Francisco federal court on Tuesday, is seeking damages after a dramatic decline in Netflix's share value.

"As a result of Defendants' wrongful acts and omissions, and the precipitous decline in the market value of the Company's securities, Plaintiff and other Class members have suffered significant losses and damages," the complaint reads.

Image credit DCL 650

The suit aims to recover damages for investors that traded shares between October 19, 2021 and April 19, 2022.

Netflix in April announced a loss of 200,000 subscribers in Q1, its first quarterly loss in a decade. The company pinned the loss on a combination of inflation, competition from rival streaming services and its withdrawal from the Russian market.

Netflix warned it could lose an additional two million subscribers in the second quarter.

Year to date, Netflix stock has shed more than 68 percent of its value. Shares are currently trading hands at $189.82, down from $597.37 at the beginning of 2022.

Netflix in its latest earnings call said it was open to the possibility of adding an ad-supported tier, and just over a week later the company canned most of the staff running its fan site. On the bright side, the first part of season four of hit series Stranger Things is set to drop later this month. Volume two will arrive five weeks later on July 1.

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Dimitriid

Posts: 2,206   +4,245
This is a situation in which for me, it's hard to choose who I dislike more: Netflix has known for a long time their growth was unsustainable so they had to be lying for years about the status of their company.

But on the other side as I mentioned before, this something like 0.1% of their subscribers: I'd be like me saying "OH NO I AM DYING!" because I hit myself in the arm, got a bit of a purple bruise but my financial report now shows that I've lost 0.1% of my cells and at this rate I am expected to just drop dead pretty soon.

I'm not dying, and neither is Netflix. But part of their success is predicated upon preaching their infinite growth to their shareholders and investors so they definitively encouraged this absolutely insane mentality we see on modern capitalist ventures.
 

Watzupken

Posts: 603   +501
Investors are not dumb (even though they pretend to be dumb), and they should know that subscription to a service can never grow infinitely. The reason for the explosion in subscription over the last 2 years is almost fully attributed to COVID where people are stuck at home and thus, looking for ways to keep themselves entertained. Now that countries are opening up, most people will be busy trying to travel somewhere, or going outdoors.
In my opinion, the way Netflix is running its business is akin to throwing money away. I've seen a lot of Netflix originals that are pretty bad. The good ones for whatever reasons tend to be canned after a few seasons. Netflix should at least try to "finish up" the series, and not pull the plug all of a sudden. Some are pulled abruptly due to licensing issues, which I can understand. At the end of the day, I feel Netflix should focus on quality of the content, rather than the quantity.
 

Sausagemeat

Posts: 1,597   +1,422
Netflix mistake was thinking if they offered a more premium service that it’s users would pay for it. Many of us only pay for Netflix as it’s less hassle than torrenting, at £8 a month that’s worth it. But at £15, il get the pirate proxy up instead…
 

Sathi43

Posts: 33   +44
The good ones for whatever reasons tend to be canned after a few seasons.
Apparently data showed that first few seasons make the most money. So they thought they can keep making first few seasons only to maximize profits. Evidently not something you can continue doing forever as viewers don't get invested in the story anymore.
 

tancabean

Posts: 41   +45
Apparently data showed that first few seasons make the most money. So they thought they can keep making first few seasons only to maximize profits. Evidently not something you can continue doing forever as viewers don't get invested in the story anymore.

This has certainly had an impact on me. I hesitate to start watching a new show when I know it’s going to be canned in 3 seasons anyway. And often there’s no closure after those 3 seasons. It just ends abruptly.
 

wiyosaya

Posts: 7,699   +6,640
This is a situation in which for me, it's hard to choose who I dislike more: Netflix has known for a long time their growth was unsustainable so they had to be lying for years about the status of their company.

But on the other side as I mentioned before, this something like 0.1% of their subscribers: I'd be like me saying "OH NO I AM DYING!" because I hit myself in the arm, got a bit of a purple bruise but my financial report now shows that I've lost 0.1% of my cells and at this rate I am expected to just drop dead pretty soon.

I'm not dying, and neither is Netflix. But part of their success is predicated upon preaching their infinite growth to their shareholders and investors so they definitively encouraged this absolutely insane mentality we see on modern capitalist ventures.
I mostly agree with your assessment; however, I am reasonably sure, based on having had a securities license many years ago, promising any investor infinitely growing returns on any investment is something that will get you charged with a crime - no doubt about it. If Netflix was promising unlimited growth, someone in their legal department had to understand that such promises would end up getting the charged with fraud and dragged into court.

IMO, these investors are a bunch of poor widdle crybabies that have expected the reality to be that Netflix growth would be infinite and unbounded. Should that prove to be the case, its my opinion that these investors should not be allowed to invest in anything. No such "ideal" investment exists, nor has one ever existed nor will one every exist. They might as well have invested in a ponzi scheme and got out early.
 

wiyosaya

Posts: 7,699   +6,640
I stop reading a comment, when I see the word pandemic.

On topic now -
Go Woke Go Broke.
🤣 IMO, its silly to think that Netflix is anywhere near broke and will go broke because of some inane reason like this. Whether you like that type of content or not, there are many out there that do. I hardly think that these investors have a case, and it will be interesting to see how this plays out.
 

wiyosaya

Posts: 7,699   +6,640
I like the shows Netflix offers - they have the best content out of all the streaming services IMO.
There are several things we do not agree on, but I can resoundingly say, though our tastes probably differ, that I agree with you on this.
 

Dimitriid

Posts: 2,206   +4,245
I mostly agree with your assessment; however, I am reasonably sure, based on having had a securities license many years ago, promising any investor infinitely growing returns on any investment is something that will get you charged with a crime - no doubt about it. If Netflix was promising unlimited growth, someone in their legal department had to understand that such promises would end up getting the charged with fraud and dragged into court.

IMO, these investors are a bunch of poor widdle crybabies that have expected the reality to be that Netflix growth would be infinite and unbounded. Should that prove to be the case, its my opinion that these investors should not be allowed to invest in anything. No such "ideal" investment exists, nor has one ever existed nor will one every exist. They might as well have invested in a ponzi scheme and got out early.
Yeah you bring up good points because I should clarify: Netflix probably did nothing outright illegal in their growth promises, this stuff is sooo widedspread that they just need to insinuate and use a few non-legally-binding business buzz words to get the point across of "This will go to the moon!" and it's largely understood that even 0.1% of de-growth means you're "dying"
 

arrowflash

Posts: 515   +590
In my opinion, the way Netflix is running its business is akin to throwing money away. I've seen a lot of Netflix originals that are pretty bad. The good ones for whatever reasons tend to be canned after a few seasons. Netflix should at least try to "finish up" the series, and not pull the plug all of a sudden. Some are pulled abruptly due to licensing issues, which I can understand. At the end of the day, I feel Netflix should focus on quality of the content, rather than the quantity.

Apparently data showed that first few seasons make the most money. So they thought they can keep making first few seasons only to maximize profits. Evidently not something you can continue doing forever as viewers don't get invested in the story anymore.

The sudden canning of good series without any closure (sometimes even mid-season), is one of the main reasons I've completely quit watching western tv series in general, around 15 years ago. This issue is far from being exclusive to Netflix and has been around for a long time.

I still remember the two that I found most painful, Crusade (the Babylon 5 spin off) and John Doe in the early 2000s. I was loving these series and both were suddenly cancelled in the middle of their first season.
 
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wiyosaya

Posts: 7,699   +6,640
I still remember the two that I found most painful, Crusade (the Babylon 5 spin off)
Right there with you. Have you ever seen anything about what would have happened in episode 17 or so in the first season? If not, you probably want to avoid seeing anything about it as it might depress you even more that it got cut short before it had a chance to live up to its potential. IMO, it just might have turned out to be the best series ever.

On a brighter note, JMS is in active development of a Babylon 5 reboot. The CW is partly behind it, but JMS, wisely IMO, had it written into the contract that if the CW ultimately turned it down, he could shop it where he wanted - probably within the WB series of companies since I read that shopping it to HBO+ might be an option.

Personally, I am looking forward to it, though it is bound to be different from the original.

Faith Manages
Delenn - Confessions and Lamentations.

EDIT: BTW - I am in what must be my 10th+ rewatch of B5 in preparation for the reboot, and it is still so amazingly relevant even if I can practically tell you what each character is going to say next. :)
 

arrowflash

Posts: 515   +590
Right there with you. Have you ever seen anything about what would have happened in episode 17 or so in the first season? If not, you probably want to avoid seeing anything about it as it might depress you even more that it got cut short before it had a chance to live up to its potential. IMO, it just might have turned out to be the best series ever.

On a brighter note, JMS is in active development of a Babylon 5 reboot. The CW is partly behind it, but JMS, wisely IMO, had it written into the contract that if the CW ultimately turned it down, he could shop it where he wanted - probably within the WB series of companies since I read that shopping it to HBO+ might be an option.

Personally, I am looking forward to it, though it is bound to be different from the original.

Faith Manages
Delenn - Confessions and Lamentations.

EDIT: BTW - I am in what must be my 10th+ rewatch of B5 in preparation for the reboot, and it is still so amazingly relevant even if I can practically tell you what each character is going to say next. :)

Haha yes, I know all about it and the unaired episodes, I've read all the leaked scripts! It really had potential to have become a great series to even surpass B5 (just like it happened with B5, captain Matthew Gideon probably wouldn't have been the protagonist through the entire series).

I'm not a fan of reboots these days. I'd much rather see JMS making a reboot of Crusade since the story had barely begun before the original series got canned, or something else in the B5 universe. But let's hope for the best. The only series I've watched in the last 15 years was the 2019 Chernobyl miniseries, but I might give this one a chance if it ever comes out.
 

wiyosaya

Posts: 7,699   +6,640
Haha yes, I know all about it and the unaired episodes, I've read all the leaked scripts! It really had potential to have become a great series to even surpass B5 (just like it happened with B5, captain Matthew Gideon probably wouldn't have been the protagonist through the entire series).
One thing for sure - it looked like it would have been awesome and I agree, it may have even surpassed B5.
I'm not a fan of reboots these days. I'd much rather see JMS making a reboot of Crusade since the story had barely begun before the original series got canned, or something else in the B5 universe. But let's hope for the best. The only series I've watched in the last 15 years was the 2019 Chernobyl miniseries, but I might give this one a chance if it ever comes out.
I agree about Crusade, however, JMS has indicated that he may tell different aspects of the B5 story in the reboot. Nothing for sure, but perhaps he might tell the story of the Telepath war, or so many other potential stories in the B5 universe that were only hinted at in the original B5. Perhaps we will get to see Lyta go to the Vorlon home world. Who knows? The possibilities are endless, IMO.
 

captaincranky

Posts: 18,739   +7,680
"As a result of Defendants' wrongful acts and omissions, and the precipitous decline in the market value of the Company's securities, Plaintiff and other Class members have suffered significant losses and damages," the complaint reads.
This is sort of comical. At this point, even if they win, they'll be getting paid with their own imaginary money..

And their staff ambulance chasers will get about 20% of the take.

Perhaps they can convince Netflix to pay them in a stable currency, Say maybe, Dogecoin?
 
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