Every public company of any significance is constantly facing down lawsuits. Some are potentially life-changing for the business, as when TiVo
Then you have class-action lawsuits filed on behalf of regular consumers. If the customer is always right, these suits must be troubling to consumer-oriented companies whose very lifeblood consists of public trust and enthusiasm. Lately, video-rental expert Netflix
This title might not be subtitled
In one class-action suit filed on March 15, the lead plaintiff is deaf and alleges that Netflix tricked him into paying for a useless service: The majority of streaming titles don't have any form of closed captioning or subtitles.
According to the complaint, that would run afoul of the Americans With Disabilities Act. More specifically, Netflix trampled on its hard-of-hearing audience when it introduced a streaming-only service and raised prices on disc-mailing options because that "amounts to unfair 'deaf tax.'" Only 6% of streaming titles have subtitles, according to the plaintiff's press materials, and more subtitles are coming along way too slowly.
I can see the point being made. I enjoy subtitles myself, in part because a house full of noisy kids makes them invaluable at times and partly because as a Swede, I grew up with subtitles across anything English or American. It's just how I roll, and it's mighty helpful even if I'm not deaf.
On the other hand, the plaintiffs may be barking up the wrong tree. As of a month ago, Netflix claimed to have captions for 30% of all streaming titles with 80% coverage promised by the end of the year. That's not too shabby for a feature that's only been available since last April. Not every streaming-capable device knows how to display the data yet, including the popular Roku and Xbox 360 platforms, but software updates to remedy that issue should be on their way.
For what it's worth, the Apple
By the time the courts really sink their teeth into this complaint, I'd be shocked if there was anything left to complain about. Netflix might have to make a small payment to settle the matter, but there's nothing terribly threatening about this one.
But wait -- there's more!
The other suit casts a larger shadow over Netflix. Citing the Video Privacy Protection Act of the late 1980s, among other legal frameworks, the plaintiff decries the way Netflix keeps rental records and movie ratings on file long after you cancel your account.
It's allegedly a breach of privacy and a dirty rotten shame, particularly if other people can use this vestigial information to figure out what you like to watch. Similar arguments put a stop to the million-dollar Netflix Prize, wherein programmers and data miners the world overused imperfectly anonymized data to improve Netflix's movie recommendations engine. With a precedent like that, this suit could have legs and might even hurt.
Asking Netflix to delete this data as soon as you cancel your account is like asking the Postal Service to forget your old address when you move. Historical data is valuable, particularly if you ever sign up for Netflix service again and don't feel like re-entering all your old movie ratings. And given the high rate of customer churn Netflix has to deal with, a cleanup like that would remove a large chunk of its ratings database. More information makes for a better service, and you can expect the company to fight this suit to the bitter end.
Where's the beef?
Other than these two class actions, Netflix has an antitrust allegation going on since 2009, claiming that Netflix and Wal-Mart Stores
All things considered, neither of these suits looks like a business-defining or profit-crushing kind. You'd best put Netflix on your watchlist anyhow, because you just never know what the courts are going to say.
Fool contributor Anders Bylund owns shares of TiVo and Netflix but holds no other position in any of the companies discussed here. Wal-Mart Stores is a Motley Fool Inside Value choice. Apple, Amazon.com, and Netflix are Motley Fool Stock Advisor selections. Wal-Mart Stores is a Motley Fool Global Gains recommendation. The Fool has written puts on Apple. Motley Fool Options has recommended a bull call spread position on Apple. Motley Fool Options has recommended a diagonal call position on Wal-Mart Stores. The Fool owns shares of Apple and Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.