Netflix settlement trims 14 pct off 4Q earnings

Feb 11, 2012 By MICHAEL LIEDTKE , AP Technology Writer

(AP) -- Netflix pressed the rewind button on its fourth-quarter earnings after settling allegations that the video subscription service violated a consumer-privacy law.

Accounting for the $9 million settlement resulted in a 14 percent decrease in the fourth-quarter net income that . reported Jan. 25.

The bottom line for the final three months of last year now comes to $35.2 million, or 64 cents per share, down from the previously reported $40.7 million, or 73 cents per share. The company, which is based in Los Gatos, disclosed the change in a regulatory filing late Friday.

Netflix's has surged 23 percent since the fourth-quarter results were released, partly because the company's earnings were substantially above analysts' average estimate of 57 cents per share. But investors mostly were impressed with Netflix's fourth-quarter gain of 600,000 subscribers - a number unaffected by Friday's accounting adjustment

The upturn in subscribers indicated that Netflix had bounced back from a public-relations nightmare triggered by a 60 percent increase in its U.S. prices last September. Netflix expects to sustain a loss this year as it pays higher licensing fees for video and establishes its service in , the United Kingdom and Ireland.

The $9 million rids Netflix of another potential headache.

A lawsuit on behalf of Virginia residents Jeff Milans and Peter Comstock alleged Netflix had been breaking a 24-year-old law by retaining records of the DVDs and Internet video that its subscribers watched for up to two years after they cancelled their plans. The complaint, filed in San Francisco federal court, cited the Video , which was passed in 1988 to prevent video rental services from sharing information about what their current and former customers have been watching.

The class-action lawsuit asserted Netflix violated a section of the law requiring personally identifiable information to be destroyed within a year "from the date that the information is no longer necessary for the purpose for which it was collected."

Retaining former customers' viewing records allows Netflix to restore their old video queues and make better recommendations if they reactivate their subscriptions.

In a statement Friday, Netflix said it didn't make any admission of wrongdoing in the settlement. No other details were disclosed in a settlement notice filed Friday in federal court. In most class-action settlements, attorneys filing the case usually are paid a large portion of any money that is paid out.

Sean Reis, an attorney representing Milans and Comstock, didn't immediately return phone calls Friday.

Netflix has been lobbying Congress to revise the Video Privacy Protection so it can introduce a feature on Facebook's online social network that would allow its U.S. subscribers to automatically let their family and friends know what they have been watching. Netflix already offers the Facebook tool in the 46 other countries it operates, but all but more than 90 percent of its roughly 26 million subscribers are in the U.S.

"This matter is unrelated to the company's concerns about the ambiguities contained in the VPPA," Netflix spokesman Steve Swasey said.

Netflix shares closed Friday at $123.93, down 91 cents.

Explore further: Two more former Sony workers sue over data breach

not rated yet
add to favorites email to friend print save as pdf

Related Stories

Netflix unveils video service in UK, Ireland

Jan 09, 2012

(AP) -- Netflix's Internet video service made its debut in the United Kingdom and Ireland Monday as part of a previously announced expansion that is expected to saddle the company with its first annual loss in a decade.

Netflix stock surges with Internet video streaming

Jan 05, 2012

(AP) -- Netflix has released some statistics that indicate the video subscription service must be doing something right, even though investors and customers have been ridiculing it for much of the past six months.

Recommended for you

Two more former Sony workers sue over data breach

4 hours ago

Two more former employees of Sony Pictures Entertainment are suing the company over the massive data breach in which their personal and financial information was stolen and posted online.

Constantly changing online prices stump shoppers

6 hours ago

Online shopping has become as volatile as stock market trading. Wild, minute-by-minute price swings on everything from clothes to TVs have made it difficult for holiday shoppers to "buy low."

'Interview' ordeal at Sony just its latest crisis

9 hours ago

How do you say "damage control" in Japanese? Sony Corp. is sealed within a hermetic cone of silence as executives try to prevent the slow motion train wreck at Sony Pictures from damaging the rest of the ...

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.