More than 25 million current and former Netflix subscribers are being offered a sliver of a $27.5-million U.S. payment to settle allegations that the video subscription service and Wal-Mart illegally conspired to inflate prices to rent and buy DVDs.
Most people covered by the agreement were notified when the details were sent in mass e-mails late Tuesday. A federal court judge gave tentative approval of the settlement in early September. A final hearing on the settlement's merits is scheduled March 14 before U.S. District Judge Phyllis Hamilton in Oakland, Calif.
Wal-Mart Stores Inc., the world's largest retailer, is paying for the settlement without acknowledging any wrongdoing. The proceeds will be offered in cash or Wal-Mart gift cards. The settlement covers anyone who subscribed to Netflix -- at any time -- between May 19, 2005 and Sept. 2 of this year.
Anyone who doesn't want to be covered by the Wal-Mart settlement or represented in the case against Netflix has until Feb. 14 to notify the court.
The individual amounts paid to Netflix's current and former subscribers will depend on how many people decide not to accept the settlement and how much money is left over after attorney fees.
The lawyers representing Netflix subscribers are asking for 25%, or nearly $6.9 million U.S., of the total settlement, plus as much as $1.7 million U.S. to cover their costs. That means less than $19 million U.S. could be left to pay the people covered by that settlement. Assuming everyone eligible participates, it would amount to less than $1 U.S. per person.
The case revolves around Wal-Mart's decision to abandon the DVD-by-mail rental market in May 2005 and turn its subscribers over to Netflix, which had about three million customers at that time. Netflix, in turn, agreed to promote Wal-Mart as a place to buy DVDs.
Wal-Mart's retreat from DVD rentals represented a David-versus-Goliath victory for Netflix. But another large company, Blockbuster, still loomed as an imposing threat. Netflix lowered its prices and prevailed in that clash too, culminating in Blockbuster's bankruptcy last year.
As Wal-Mart and Blockbuster fell by the wayside, Netflix's growth rapidly accelerated. A backlash from the recent price increases triggered a wave of cancellations, but Netflix still ended September with 23.8 million subscribers.
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