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Netflix adjusts Q4 profits down 14 percent after lawsuit settlement

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Netflix previously announced Q4 2011 profits were adjusted as the company paid out $9 million in a class-action settlement stemming from the Video Privacy Protection Act.

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Netflix logo

Netflix's previously announced Q4 earnings took an unexpected hit as the video streaming company paid out $9 million to settle a class-action lawsuit. Netflix disclosed the 14 percent dip in profit in a regulatory filing on Friday. The settlement pertains to a class-action lawsuit centred around the Video Privacy Protection Act (VPPA) — a law that Netflix is actively trying to change. Jeff Milans and Peter Comstock launched separate class-actions against the company in 2011, both claiming Netlix had violated the 24-year-old law which requires video rental companies to get written consent from users to keep records of their viewing history, as well as destroy said records as soon as practical, but no later than a year after the data was collected.

The settlement closes out what was a tumultuous 2011 for Netflix. The company announced plans to increase subscription prices and spin off their DVD-by-mail service — the quickly abandoned Qwikster — and lost all Starz content. This played a part in 800,000 subscribers jumping ship in Q3 2011, but Netflix was able to regain 610,000 this last quarter. While they still have the matter of amending the VPPA to deal with, here's hoping for less bumpy 2012 for Netflix.