The fallout continues for Netflix after the streaming giant announced that it lost over 200,000 subscribers in its first fiscal quarter of 2022, prompting it to slash several projects as it attempts to get its astronomical spending under control. The company had projected that it would gain subscribers, which was clearly not the case, and now, shareholders are claiming fraud in a new lawsuit against the streaming service.
The aggrieved investors are seeking “compensatory damages in favor of Plaintiff and the other Class members against all defendants, jointly and severally, for all damages sustained as a result of Defendants’ wrongdoing.” (Read: Money. Lots and lots of money.)
Via Variety:
Netflix misled investors about declining subscriber growth over the course of six months — leading to a massive drop in its stock price, according to a shareholder lawsuit.
The lawsuit, filed Tuesday in federal district court in San Francisco, alleges Netflix violated U.S. securities laws by making “materially false and/or misleading statements” and also because it “failed to disclose material adverse facts about the company’s business, operations and prospects.”
As for the subscriber issue, well, things don’t look to be improving there either. According to Variety, Netflix is already projecting that it expects to lose an additional two million in its second quarter. Yikes. Interestingly, analysts blame Netflix’s mammoth success on its subscriber growth issue. In a nutshell, the streaming service has such vast market penetration that there are very little left to sign up. Take away the pandemic, which created a captive audience, and a subscriber plunge was inevitable.
Netflix also has to contend with users growing complacent with its original offerings, its quick hooks of series after just one or two seasons, and a diminishing back catalog as other studios and networks build up their own competing streaming services. It’s also reportedly dropping over $30 million per episode on Stranger Things. So there are a few culprits here. That’s the point.
(Via Variety)