Netflix disclosed in a filing with the Securities and Exchange Commission today that the commission had warned the company and CEO Reed Hastings that it may bring a civil case against related to disclosures Hastings made about the state of the company’s business on his Facebook page.
The SEC warned Netflix in a letter yesterday that its social media strategy may put it afoul of regulations governing fair disclosure of financial information.
We use blogging and social media, including Facebook, to communicate effectively with the public and our members.
In June we posted on our blog that our members were enjoying “nearly a billion hours per month” of Netflix, and people wrote about this. We did not also issue a press release or 8-K filing about this.
In early July, I publicly posted on Facebook to the over 200,000 of you who subscribe to me that our members had enjoyed over 1 billion hours in June, highlighting how strong our content was… Again, we did not also issue a press release or file an 8-K about this.
SEC staff informed us yesterday that they are recommending that the SEC bring a civil action against us for my July 1 billion hour public post, asserting we violated “Reg FD.”… The SEC staff believes that I gave you all “material” investor information in my post and that we needed to instead release the June viewing fact “publicly” with an 8-K filing or press release.
At issue is whether a Facebook post is public information disclosed to all investors and potential investors, or whether it might give unfair advantage to a select group.
“We think posting to over 200,000 people is very public, especially because many of my subscribers are reporters and bloggers,” Hastings wrote, also on Facebook.
He also maintained that the data point did not constitute material information about the company because a previous post on the company’s blog had announced that it was nearing the billion-hour milestone.