You might have heard this stat before: Netflix users have passed over a billion cumulative watching hours a month, according to the company. This stat got a lot of coverage when it was posted on CEO Reed Hasting’s Facebook page in July, referencing June’s viewing numbers.
The surprising thing about the story was, of course, the huge number of viewers; few, if any, noted that it had been posted on Facebook. In the tech news world, a post is a post. The stock jumped a few percent, apparently due to the news.
Today, the SEC has sent Netflix a Wells Notice — a warning that it might be about to pursue legal action against the company. The commission told Netflix that it may have violated Reg FD — that stands for Fair Disclosure — by posting the update to (public!) Facebook. Netflix CEO Reed Hastings wrote of the interaction:bq. 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. There was press coverage as there are many reporters and bloggers among you, my public followers. Some of you re-posted my post. Again, we did not also issue a press release or file an 8-K about this.
He continues, “we think posting to over 200,000 people is very public, especially because many of my subscribers are reporters and bloggers.”
This is a fair point. He then notes an even stranger issue with the SEC’s notice: Netflix had posted the billion-hour figure the month before on its website:
This is a profoundly strange series of events. Is a Facebook post less public than a press release? The rule reads as follows:bq. The regulation provides that when an issuer, or person acting on its behalf, discloses material nonpublic information to certain enumerated persons (in general, securities market professionals and holders of the issuer’s securities who may well trade on the basis of the information), it must make public disclosure of that information.
The idea that a Facebook post, which is likely to be seen by consumers, would represent a disclosure to these “certain enumerated persons” while a press release, most likely first seen by investors and journalists, would be a more effective “public disclosure” seems at odds with how people get information about tech.
Update: A previous version of this post referred to a violation of Reg FD as “insider trading.” This was not accurate.