Netflix Shareholders Sue, Claim Streaming Company Downplayed Slowing Subscriptions

Netflix has been hit with a lawsuit from shareholders which says the streaming giant misled investors about its ability to retain subscribers, Reuters reported Wednesday (May 4).

The lawsuit was filed by a Texas investment trust. The lawsuit seeks damages for the fall in Netflix’s share price this year, as the company missed subscriber growth estimates.

The suit goes on to say Netflix and its top executives had not disclosed that subscriber growth for the company was slowing down amid competition and Netflix was losing subscribers overall.

Netflix shares fell 20% in January after it disclosed weak subscriber growth, and fell 35% more on April 20 after it said it lost 200,000 subscribers in the first quarter, when it had forecast adding 2.5 million.

Netflix said the losses were because of competition, as well as inflation and the fact that it stopped offering service in Russia because of the country’s invasion of Ukraine – the last item cost Netflix 700,000 members.

The lawsuit names Reed Hastings and Ted Sarandos, the co-chief executives of the company, along with CFO Spencer Neumann.

It will seek damages for investors who traded shares for the company between Oct. 19, 2021, and April 19.

See also: It’s Time for Netflix to Stage Its Next Blockbuster Pivot

PYMNTS wrote that Netflix may be in need of another “Blockbuster pivot” to change its business model after initially seeing a burst of profitability as its rival store went out of business in the early 2010s.

The report said Netflix will have to do “more than just follow the pack” by bringing ads in, and said that Netflix’s biggest asset is “the attention of its users.” Netflix has to look at monetizing the attention of the users in “creative” ways, such as embedded eCommerce.