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Netflix Avoids Class Action Lawsuit In Wal-Mart Case

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NetflixOnline video streaming service provider, Netflix Inc. (NASDAQ:NFLX) is currently overjoyed after the company was acquitted in a class action lawsuit dating back to 2009 by judge Phyllis Hamilton, the United States District Court Judge in Oakland, California.

The class action lawsuit was filed during the year 2009 when the company had allied with Wal-Mart stores Inc. (NYSE:WMT) the leading retail chain in the United States to create a monopoly over the DVD rental market. This deal had swelled the subscription prices in the DVD rental market for a five year period between 2005 and 2010.

U.S District Judge Phyllis Hamilton in the ruling stated that the Wal-Mart Stores and Netflix agreement  did not influence the pricing strategy  of the DVD subscriptions and rentals in any way and both the companies were in no way involved in any kind of antitrust violations. The judge also stated that the market share of Wal-Mart, which has already pulled out of the online DVD market, was insignificant and the collaboration between Netflix Inc. and Wal-Mart Stores could not have influenced the pricing strategy of Netflix in any way.


The acquittal of Netflix comes as a good news for its investors as they are wary about the fact that Netflix Inc. is attempting to raise about $400 million at about $70 a share through convertible bonds and stock offerings.  Netflix Inc. is attempting to increase its footprint desperately in the international market in order to overcome the huge churn in the domestic subscribers in United States.

The company has no expectations for the growth in the subscriber base for the current quarter and according to the forecasts, the fourth quarter of 2011 is expected to turn out profitable for the company which is set to be followed by losses in consecutive quarters in the coming fiscal year. The losses are expected as the profits from domestic market are unlikely to be high enough to offset the costs arising from the expansion of the company into the international market.

Netflix also has plans to develop the company’s streaming library in the domestic market by making use of the proceeds from the transactions in order to attract more subscribers. Currently Netflix has cash and cash equivalents worth $365.8 million against a long term debt of $200.0 million. Netflix is also required to pay about $3.5 billion to obtain the rights from the Hollywood studios to stream content.

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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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