arrows now what it termed its online entertainment platform offering full length movies had tens of millions of what they called registered users who included quote transactional and premium users reasonable investors understood that such registered users were not only registered with the arrows now service but were also able to actually use the service in order to watch those full length movies and that is that your honour's is the really the core issue that's for this court in reviewing the complaint they had said thirty million subscribers you wouldn't have  i think we already thirty million members you wouldn't have a case i think we would have a case your honor considering that the service didn't work i think there's there's the problem is that is that the service didn't work and when you talk about the way the service worked if you had the right kind of equipment to use it right well i mean they did they could stream movies if not the problem isn't on their end the problem is on the users and that if you went and signed up and even if you paid money for premium service or whatever if you hadn't bought your computer yet you couldn't use the problem your honor is that in india where the vast majority of registered located this wasn't right indian companies or as we understand it very few of the users proportionally were outside of india the the state of technology in india in terms of broadband and and such were not of the level that would permit most people in india would not be able to use the service with the kind of equipment that most people in india have which apparently was early generation type cell phones that didn't have the current kind of capacities that we take for granted is correct they had done phones and you had two g predominantly and write the music and the world knew that or could know that world did not know that at least there's no indication that the world didn't know that because when it's a secret that what what kind of a cell phone service is available in india what i can say your honor is that they get an i p o at the stock exchange here which was successful and then when when word got out but they said in their prospectus that their ability to do anything ective and make any money depended on future technological developments and they stated in the very paragraph that you quote though you didn't quote these words that most of those users had a w a p access to the system right that what they were referring there your honor were people who came from texas tech out own was this other value added service that was acquired some time early in the class where at one point they got ten million of at that time the fourteen million people they were claiming right that's kind of important that this is what those ten million people had here's the problem so they said that they successfully converted those ten million people to be arrows now registered users they did they signed up now they didn't they bought that customer as we are they bought that customer list and bought the right to market arrows now to the customers where i did not think that maybe a mistake and i thought that at least in this court you are no longer alleging that they did not have those people actually signed up that is to say when they say they had thirty million people i thought you were not contending that they didn't have thirty million people actually signed up you  only contending that those thirty million people the vast majority of them could not actually make affective use of the streaming service we are alleging now we are alleging that the thirty million people couldn't use the streaming service were also alleging the thirty million number is inflated because ten million approximately of those people are tech zone customers who were using a different platform that was owned by arrows but which we allege was siloed and and  an incompatible platform to the arrows now platform but you're saying they they falsely stated they had had successfully converted those members because none of those members actually said yes i'm signing on the dotted line i want to be in europe they may have done something your honor like provide an email address what are their mobile number but in addition to to the siloed nature of the platforms for the same reason that connection and all you'd need to do would be to look that up and find out what it means to figure out that they couldn't in fact make use of the streaming service is that not correct it is not your honor because at the same time they're saying that those people were successfully converted and the analysts who are reviewing this information like like jeffries and and wells fargo who were the chief analyst that were reviewing this information were talking about next step monica's ation they were talking  exactly all the facts host the class period i mean it is my understanding that the euros now services continuing i don't know what the state of technology in india is today it's probably better than it was during the last period i would i would you know i would i would i would  presume that that would be a fair contention but at the time it was not and when the october two thousand and fifteen wells fargo report came out where wells fargo was having some real concerns about the nature of the of the user list the stock dropped seventeen percent which is a particularly material amount because arrow's wasn't making a great deal of revenue compared to the entire aerospace company heiress now was only one part of a company the company was a large bollywood movie that the defendants filed here they contended that tex own was acquired in february two thousand and fifteen and that was also it was on february seventeenth of two thousand and fifteen where  that these ten million people were successfully converted so i think it's interesting that they would sign a contract to purchase the tax on company sometime in february of two thousand and fifteen i don't know what date they didn't disclose that date and then on february seventeenth of two thousand and fifteen they would say they had successfully converted and no he a user in in your definition suppose it turned out that everybody signed up for the service and then it also turned out for whatever cultural reason most people in india like me would rather see a movie on a big screen than look at on a cell phone they didn't like the service and they never used it again after checking in once  thing to see what it would look like i don't know if it would that be that they not be users they would be users if they could use it and simply didn't like it but i don't think it's a question your honor of  maybe a look at some day and they never do those would still be registered users in your view but if they lacked the right if they lacked a hardwired bios connection in their house on a p c but only had a cell phone they wouldn't be registered users is that the idea i think that is is is part of the idea but now it's my impression that facebook and twitter and people like that use terms like daily active users or monthly active users when they report on their customer base and i had was under the impression that that was a term of art in the social that registered user is a generally understood term of art in the streaming industry or whatever that was you know if i use the term of art i don't recall using that term term of art but the only the only cases where where i had found the term and because something they were going to do in the future but you can't monetize until you have a base of users that are using the system for free and are able to to use it you have a loyal base of users that are using free and ad supported content  advertising you have money because yes you just have different business model you sold the customers to the advertisers rather than selling your service to customers but that's not what they want to do you're out of the the idea they're in the idea with their us now with start by by getting the user would actually pay any money for it it implies i think to the market that you could actually use the service and it wasn't and you didn't just necessarily sign up for something that you couldn't couldn't use and especially when you're talking about in the same breath in your i p o prospectuses this is a service that offers full time or full length excuse me movies and in november of two thousand and four the c e o spoke to the u s market and called  now the i believe it was the netflix meet school who meets ata high meets i tunes of indian content the c e o didn't say well we're just getting off the ground and we don't really have one simple claim that a person cannot be a registered user if he or she cannot meaningfully make use of the product i heard a lot from my colleagues on the other side this morning about what this company is let me take a step back it is not certainly not at the time of the i p o a company that launched on the merits of your oh so now it's a company actually which produces acquires and distributes the actual contents and that is why people invested in this company at the time of user speaks for itself it's someone who registers for the service if we want to call them active users we would have called them active users and i think when we when we look at what was said time and time again about the growth of registered users it was crystal clear that the predominant number of people that were registering for the service were not only in india as judgment recognized but also reason to whap were w a p protocol which anyone with google would have known was behind the times and was not exactly like using an internet terminal on your p c if you look at the statements that were made here they have nothing to do with the meaningful use of us now february twenty seventh two thousand and fifteen right after the tech's own acquisition that my colleague focused on so so closely the company reported fourteen million registered users now what my colleague didn't say is that there was a step further not just free premium and transaction but also that ten million of these people are own not only that from texas they're from india and they are and beyond that less than one percent of the total user base is paying for the service i didn't hear that from him at all and it's actually not in their briefs so we were crystal clear at the inception of an this transaction most people are free users and that they're behind the times when using the technology is your ass and from in india there's also another key thing that was disclosed during the conference call which gives key context to what people were doing to use this service in india the c e o specifically disclosed on the earnings call that the erosive now platform is also being used by whap users to purchase ring tones on the euro snap platform and that was something that was actually credited by judge nathan during her decision to recognize it even if someone couldn't stream a full length movie there were other things that could be doing with the service in june of tenth of two thousand and fifteen era's grew its product size for your us now it's a one thousand million registered users once again it was crystal clear of this one thousand million fifteen and a half of those registered users were in india once again the c e o also reconfirmed less than one percent were premium users the ones who are paying a monthly fee for the service and lead to say a fifteen and a half million of the people are in india there are other people outside of india with the appropriate technology to still use the service the service worked this is not a can for super fraud dispute  going a step further aug eighteenth of two thousand and fifteen the size of a registered user base grew to twenty six million users registered users once again and this is something that's completely glossed over i heard from my friend that you know the company never said what technology needs to catch up we need to get there during this earnings call the c e o is explicit she told investors in order to increase the number of premium users and i quote four g growth has to happen broadband has to happen so the user experience is not just a function of all the cool things we do it's a function of broadband and bandwidth and that's because as anyone knew who was looking at this product at the time with the majority of users being in india the technology had to catch up let me touch on touch texan for a moment i think that's an important part of my colleagues argument they originally argued that we had overstated their user count and i'm not going to get into that at length today because it's not part of their operative pleading this point but what they're saying now texan actually doesn't reconcile at all with the operative my colleague is claiming somehow we co mingled and paddy had and potentially inflated the number of registered users by pointing to this texan transaction which he claims was acquired you know a week or so before this key earnings call well the problem for my colleague is paragraph two forty eight of his operative pleading civically acknowledges the texan actually had forty million customers at the time of the acquisition so by announcing that ten million of the was part of a year long marketing campaign a systematic marketing campaign in which your us approached texan users they did acquired a right to approach them as part of this transaction and they systematically marketed it and as the c e o explained during that earnings call it was a two step process this was not an automatic conversion it took quite some time it was not you know a flash in the pan for a five day increase of ten million registered users more importantly your honor i just want to  briefly on the revenue point because unlike most securities fraud cases this is nothing to do with an instance where companies accused cooking the books although at one point in time the class action that claimed we cooked the books but that's no longer at play here this is a case where the the at parents are trying to give the misimpression that your is now is the principal revenue driver of the company and as i explained earlier it was not the principal revenue driver at the time of the i p o it was not even the principle revenue driver at the end of the class period the company was crystal clear when it disclosed that only one percent of the registered users were paying for the service and they were also crystal clear in november of two thousand and fourteen when they acknowledge it would take at least a couple of years to monetize the service again that's november of two thousand and fourteen if you extrapolate that by the at least a couple of years you're at november two thousand and sixteen yes what that's after the class period it's a year after the class period there were full disclosures at all points this was not generating revenue for the company during the class peer in any type of material way it was not the principal revenue driver on the topic of a missions the appellant's argue that the company failed to warn of the risks regarding the technology and that the fact that the registered users couldn't make meaningful use of the service i frankly don't understand this argument first of all in this court there is no right of self confession and second of all you don't need to just every little thing just because you think someone might be interested in it unless you give an affirmative statement that requires more disclosure you're not required to say more but here we actually did say more we included disclosures like the want to mention a moment ago where the c e o explicitly said we need rove three g four g to happen we need broadband we need band with we also had explicit risk which at every single turn including in the i p o specifically disclosed that state of technology would be a potential impediment for the sec success of certain products including your us now i'd also like to just mention it the seventeen percent drop from wells fargo had to do with a whole host of issues none of which really had to do with their us now it was far report on its face deals with many issues including free cash flow including accusations that the company was potentially being left behind with some of its competitors and frankly that thing was occurring at a time when the company was under hostile attack by short sellers the alpha exposure reports which were the centerpiece of this case  went on appeal we're on honest blog post by a short seller that short seller has now been on mast we know who that is and we're pursuing that action in a separate court the last causation for the purposes of this case the seventeen percent the fact that the company i mean if you you look at in our complaint the initial reports of mcquarrie capital and wells fargo and initiating their coverage of the company they both said that that the the investor interest was clearly focused on a roast now that was why squarely on arrows now the whole focus of the i p o and investor interest here in the united states was the eros now service and the reason for that was that unlike netflix they had their own library of films so alison investors were excited enough to buy content and they could simply show their own movies so to suggest that arrows now was a small you know sort of small part of things is not consistent with  that's all i'll say about that one percent issue ms despond day the c e o specifically walked back those remarks in june of two thousand and fifteen she had said something on that point as as mr cowper said in february of two thousand and fifteen and then in june of two thousand and fifteen she was asked questions about that and she specifically walked that back and said essentially i didn't mean to say that and she said that actually one percent of paid subscribers would be wonderful at this point in time