Ex-Director of Content Acquisition Files Multimillion-Dollar Lawsuit Against Netflix and Amazon

2 Apr, 2014 By: Erik Gruenwedel

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Lawsuit sheds unflattering light on Netflix’s corporate culture

A former Netflix executive charged with running content acquisition for the subscription streaming pioneer’s Canadian operations has filed a multimillion-dollar lawsuit against the company, as well as its rival, Amazon.

In the lawsuit, filed April 1 in U.S. District Court in Los Angeles, plaintiff Jerry Kowal claims he was “blacklisted,” “defamed” and accused of stealing confidential information by Netflix when he left to join Amazon’s SVOD service, Amazon Prime Instant Video.

The suit, which also names CEO Reed Hastings and chief content officer Ted Sarandos as defendants, claims Netflix used its “substantial business relationship” with Amazon to “guarantee” Kowal would subsequently be fired by Amazon and “substantially hindered” from finding comparable replacement employment.

In addition to a jury trial, Kowal is seeking at least $1 million in damages.

While lawsuits typically present one-sided arguments on behalf of the plaintiff, Kowal’s claim is noteworthy for shedding light on some of the inner workings at Netflix, its international operations, and the interdependent relationship the company has with Amazon — despite being a competitor. Netflix is one of Amazon Web Services’ largest customers.

Netflix, which singularly created the subscription streaming business model and market, is in the midst of expanding operations globally — a strategy that thus far continues to generate significant losses, including $57 million in the most recent quarter.

Indeed, the lawsuit lays out claims Netflix personnel in charge of acquiring content for its U.K. operations characterized the service in the region as a “leaky bucket” due to high subscriber turnover. Per policy, Netflix no longer discloses subscriber churn in fiscal statements.

The suit claims Kowal, who was hired in 2012 as director of content acquisition working in Netflix’s Beverly Hills, Calif., office, was entrusted overseeing content licenses for Netflix Canada — the company’s first international operation. The defendant subsequently was tasked with greater responsibilities, including speaking to Canadian media and government officials.

The suit claims Kowal was then given further expanded duties that included dealing with licenses involving the U.S. television market — Netflix’s largest content spend business.

Despite glowing performance reviews and statements from Netflix senior executives, Kowal decided to leave Netflix and join Amazon’s burgeoning Prime Instant Video service after what the suit claims was an ongoing “hostile” work environment at Netflix.

The suit claims Netflix cultivated “a toxic culture” where employees were “constantly petrified of losing their jobs.” In one instance, Sarandos, in front of 200 senior employees at a quarterly meeting, allegedly made “unsolicited, disparaging remarks” about a former executive who had left to join Amazon.

When Kowal decided to leave in June 2013, he was offered a pay raise and allegedly told by Sarandos that Amazon would be out of the streaming video business “within two years.”

After leaving, Kowal found out he was being investigated by Netflix for allegedly giving “confidential and proprietary documents and information to Amazon.” In addition, the suit claims Netflix personnel were instructed not to communicate with Kowal.

Despite forensic investigations into his personal emails, computers and portable devices by Netflix, it was determined Kowal had not disclosed any confidential information to Amazon, according to the lawsuit.

Nonetheless, Kowal was terminated by Amazon July 31, 2013 — about 40 days after starting his job — despite alleged assurances by the e-commerce behemoth’s legal representative that complying with Netflix’s investigation would not jeopardize his job.

Per policy, a Netflix representative said the company does not comment on litigation.

 

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