Texas Town Sues Netflix And Hulu

If you live in New Boston, Texas and you're watching Netflix right now, just know that your town is suing them. The Hollywood Reporter brings word of a class action suit filed against both Netflix and Hulu in Texas federal court today on behalf of the city. The suit alleges that both streaming providers, by providing their services in the town, are required by Texas state law to "pay each of those municipalities a franchise fee of 5% percent of their gross revenue," as a result of using wireless facilities "located at least in part in public rights-of-way." Netflix and Hulu have yet to respond.

"When a Netflix subscriber wants to view Netflix programming, the subscriber's Internet service provider will connect the subscriber to the closest Netflix Open Connect server offering the fastest speeds and best video quality," the complaint reads in part. "According to Netflix, that means that most of its subscribers receive Netflix's video programming from servers either inside of, or directly connected to, the subscriber's Internet service provider's network within their local region."

It continues, "As video service providers, Defendants were required to file an application with the Public Utility Commission of Texas for a state-issued certificate of franchise authority prior to providing video service. Defendants failed to apply for and obtain a SICFA, and are, therefore, providing video service throughout Texas without authorization, and in contravention of the Texas Utility Code."

Though the suit was filed for New Boston, the suit mentions that the class size for the entire suit is "believed to be in excess of two hundred municipalities." Should this suit go through it could mean a major check from both streamers would need to be written. Curiously absence from the suit however is a mention of The Walt Disney Company's Disney+ (despite Disney being the owner of Hulu as well). The official listing of companies with SICFAs in Texas doesn't include Disney or Netflix; AT&T of Texas is listing, perhaps giving WarnerMedia's HBO Max a means to not be sued for similar reasons. As THR notes, Netflix was sued two years ago in Creve Couer, Missouri but has yet to be ruled by a judge.

A recent study by stream-tracking experts Reelgood revealed that Netflix held 32-percent of the market share for the second quarter of the year, beating out Amazon (25 percent), Hulu (18.6 percent), Disney+ (6.1 percent), and the brand-new HBO Max (5.2 percent). This shouldn't come as a major surprise though as the service added a record-high 15.7 million new subscriptions in the first quarter of the year. There are now 182.9 million Netflix subscribers worldwide, 22.8% higher than the total this time last year. With numbers like that, perhaps quite bit of the 4500 people who live in New Boston, Texas are subscribers.