Netflix Facing Legal Pushback From their Shareholders
Written by: Caitlin Hamilton
Have you recently been logged out of a Netflix device that you’ve been logged into for years? Maybe you’ve even unsubscribed from the streaming service out of frustration for not being able to log into multiple devices at once. Well, if you’re feeling a sense of frustration with the company, you’re not alone. Class members who purchased Netflix stock between October 19, 2021, and April 19, 2022, have filed a lawsuit claiming Netflix misled its shareholders on their forecasted earnings which have allegedly caused its shareholders to suffer significant losses.
Following Netflix’s April 19, 2022 earnings report, the stock plummeted 35%. Netflix has admitted that the less-than-anticipated performance is attributed to, in part, 100 million additional households who were accessing Netflix without paying for a subscription. Following its stock plummet, Netflix rolled out a pilot program in select markets that introduced the ‘paid sharing’ model. The initial launch frustrated many consumers whose market was included in the program, which ultimately led to a delay in its widespread launch in the United States and other global markets. While this may seem like a risky business decision, as subscribers have already started to cancel plans in protest of the now-live launch, Netflix remains optimistic that this decision will prove beneficial to its long-term growth.
Their positive outlook comes on the heels of a 102% increase in sign-ups after informing subscribers via email of this decision, from their prior 60-day average, surpassing the initial daily sign-up average during the early stages of the Covid-19 pandemic. This pegs the question: Will other streaming companies soon follow a ‘paid sharing’ business model? Well, since Paramount+ has announced adding Showtime to its platform, and Disney and Hulu are planning to collaborate into one singular app, it wouldn’t come as a surprise if the other companies wanted to hold out and observe profit margins amidst the many recent changes and developments in the media industry. However, Netflix, the platform that has long been known as the streaming service without ads, and has loudly rejected the idea in the past, now has a starter plan that includes advertisements and a limited library. Hence, in the ever-changing media industry, anything is possible.
Will the cheaper, ad-supported plan help fight against the recent backlash? We will soon find out. In the meantime, the publicly traded company is starting to pick up its trajectory again, nearing its 52-week market high after dropping significantly in 2022.