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A lawsuit seeking class action status accuses Meta of rolling back its now shuttered Facebook Watch streaming video service to give Netflix a clear path as part of a deal to split the spoils of the new digital landscape.
The antitrust suit filed in U.S. District Court for the Northern District of Illinois by two residents of the state (and Netflix subscribers) said that documents recently unsealed from an earlier lawsuit against Meta show that the two companies agreed to collude shortly after Facebook “began to directly compete against Netflix in the market for video-streaming services by launching Watch, a video-streaming platform that offered consumers the same kind of TV-like shows that were Netflix’s bread and butter.”
Netflix CEO Reed Hastings was on Facebook’s board of directors at the time and, the suit alleges, conversations with Facebook (now called Meta) CEO Mark Zuckerberg “ultimately led to a conspiracy against the public when Zuckerberg and Hastings allocated markets by agreeing that Facebook would cede the video-streaming market to Netflix by hobbling the Watch platform. “In exchange, Netflix would keep funneling its customers’ data and advertising spend to Facebook (which used the Netflix data to further supercharge its lucrative targeted-advertising algorithms).”
The suit says the “anticompetitive agreement between Facebook and Netflix decreased consumer choices in video-streaming services while at the same time increasing consumer costs because Netflix was able to charge subscribers more than it would have but for Facebook’s relinquishing the video-streaming market to Netflix.
It cited documents from the previous case, Klein v. Meta Platforms, saying they “revealed for the first time that Facebook “starved its Facebook Watch video service to appease Netflix and sustain its ad monopoly.”
“Shortly after Facebook and Netflix cemented their agreement not to compete in the video-streaming market, Netflix for the first time raised prices for all Netflix subscriptions,” said, asking for a jury trial on behalf of the class, which includes any Netflix subscribers starting August 7, 2017.
Netflix declined to comment on the suit. Meta didn’t immediately respond to a request for comment.
Facebook Watch launched in 2017 and began purchasing the rights to episodes of TV series like Buffy the Vampire Slayer, Angel and Firefly, the suit said, also identifying House of Cards, a popular Netflix series, and Scandal “as examples of premium programming that it would be interested in purchasing for Watch.”
In May of 2018, Zuckerberg cut nearly $1 billion from Watch’s budgets for original content and sports for the following year, according to the suit. In early 2019, Facebook “said it would not be renewing most of the 21 news shows that it had only recently premiered as Watch Originals”. By early 2020, “Facebook had announced that it would not be renewing a majority of its original programming.”
Zuckerberg indicated then that the purpose of Watch had always only been as a way to “market” Facebook, the suit said. But “Facebook has never offered a persuasive — or even coherent — explanation for Watch’s demise.”
The reason, is because it was “a quid pro quo.”
“In exchange for Facebook’s eliminating Watch as a serious competitor in the video-streaming market, Netflix would continue to funnel its subscribers’ data to Facebook and, of course, to purchase hundreds of millions of dollars in targeted advertising on the social-media platform.”
The suit said Facebook shared subscriber information about which videos users were recommending to their friends. It said Netflix paid Facebook approximately $40 million per year to run advertisements for its series and movies in the year before Facebook announced Watch, a number that increased to approximately $150 million to $200 million a year “after Facebook voluntarily neutralized Watch as a competitive threat.”
Facebook and Netflix entered into an agreement to build a dynamic advertising model that would target users with Netflix content specifically, the suit claims.
“This model was precisely the kind of targeting that Facebook would have needed to do in order to promote its own Watch product, but instead it was undertaking the effort to promote Netflix’s streaming product in exchange for user data to supercharge and train its advertising systems.”
