Is Netflix’s Data Collection as Deceptive as Texas Claims?

Netflix is being sued in Texas by Attorney General Ken Paxton for reversing its own promises to provide a ‘safe respite’ from the surveillance and data collection of big tech. 

The lawsuit accuses the streaming behemoth of operating a surveillance system that monetises viewing habits. 

In a complaint filed on 11 May, the top prosecutor claims that Netflix uses addictive designs to keep users hooked while recording billions of pieces of information.

The company has rejected the claims made by Ken, saying it will challenge the lawsuit in court.

Netflix’s binge-spying

Leading with the phrase ‘When you watch Netflix, Netflix watches you’, the lawsuit alleges that every interaction on the platform becomes a data point revealing information about the user. 

Ken claims that it records and monetises these interactions despite suggesting otherwise in public statements.

However, a spokesperson for the company told the BBC the lawsuit lacks merit and is based on distorted information.

They say: “Netflix takes our members’ privacy seriously and complies with privacy and data protection laws everywhere we operate.”

The filing, on the other hand, quotes Reed Hastings, former CEO of Netflix, for previously saying that the company would not collect or monetise user data.

Reed has shot down the notion of an ad-supported company multiple times in the past. He told Guggenheim Securities that Netflix wanted to be a safe respite for consumers. According to him, a simpler business model avoids the privacy pitfalls of Google or Meta. 

During Netflix’s 2019 Q2 earnings letter, he spelled out the reasoning behind the same. “We, like HBO, are advertising free. That remains a deep part of our brand proposition; when you read speculation that we are moving into selling advertising, be confident that this is false,” he wrote.

Broken promises

In April 2022, Netflix saw its first quarterly decline in subscribers in more than a decade. The company’s market value slumped by 65% over a year. This led executives to announce plans for adverts to attract new users.

Netflix launched Basic with Ads in November 2022 in 12 countries, including the UK and the US. The plan cost £4.99 (US$6.37) in the UK and US$6.99 in the US at launch.

This was a huge success for the company as the ad-supported tier grew significantly, reaching more than 250 million people globally by May 2026. 

Netflix reported earning US$1.5bn from ads in 2025 and is now expanding the tier to 15 more countries.

Starting next year, Netflix plans to show adverts within the vertical video feed it recently launched on its mobile app, representing a strategic push to monetise content on smartphones.

The company is also finding more areas to place commercial content across its service, including a new line up of podcasts added late last year. 

An ultimate pivot

The lawsuit in Texas claims Netflix’s pivot on ads leverages mountains of data quietly extracted from children and families. Ken says this data is shared with commercial brokers to help raise billions of dollars in revenue.

The filing says Netflix uses a combination of addictive design features, such as auto-playing content, to keep people on the site. These features allegedly allow for extensive logging of user activity.

Ken believes the company has violated the Texas Deceptive Trade Practices Act. The Act forbids false, deceptive or misleading acts and practices in the course of commerce.

The lawsuit wants the court to order Netflix to delete all data deceptively collected from Texas citizens and cease the processing of user information for the purposes of targeted advertising.

Additionally, the legal filing requests that the company turn off the auto-play feature by default for all children’s profiles and pay civil penalties of up to US$10,000 per violation. 

Experts note that a successful California lawsuit against Meta and YouTube regarding addictive design could also influence this case. 

With Netflix currently testing a new personalisation tool that adjusts what ads subscribers see based on their viewing behaviours, it is going to be tricky for the streaming giant to sidestep this lawsuit. If only it had a “skip intro” button for its own legal drama.