Why Walmart’s Netflix Settlement is Worthless (Twice Over)

By  |  Tuesday, November 29, 2011 at 8:33 am

If you received an email recently telling you that you would be receiving a Walmart gift card or cash equivalent as part of the corporation’s settlement in a class action lawsuit alleging that Walmart and Netflix illegally worked together to fix DVD rental or purchase prices, then I’m afraid there’s some bad news: It probably won’t amount to enough to rent a DVD (or buy a coffee, for that matter), and there’s no more where it came from.

You may remember that back in September, a court in California tentatively approved Walmart’s proposal to provide its settlement to the lawsuit in the form of Walmart.com gift cards, a suggestion that Netflix opposed because that site is home to potential Netflix competitor Vudu. At the time, Netflix called the idea “the equivalent of a marketing campaign that costs Walmart only 68 cents per potential customer,” but it turns out even that might have been lowballing the actual value of the settlement to the end user.

Here’s where we have to use math. Walmart has set aside $27.25 million to pay for the settlement, but a quarter of that amount–almost $6.9 million–has already been claimed for attorney fees, with an additional $1.7 million earmarked for “other costs.” That leaves just $18.7 million left for Netflix subscribers, past or present, who signed up for the service between May 9, 2005 and September 2, 2011. In case you’re wondering, that amount is estimated at a possible 40 million people, meaning a potential payday for each subscriber of…47 cents.

Don’t spend that all in one place.

(Admittedly, that’s a worse case scenario; the $18.7 million will be split between those who apply for their share, and it’s extremely unlikely that all 40 million possible applicants will end up doing so. Those who received the mid-November email about the settlement have until February 14 to file claims for their share of the settlement pie, and even then, the court will have one further hearing in March to finalize the settlement terms. In other words, nothing’s final at this point.)

[This post republished from Techland.]

 
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3 Comments For This Post

  1. Scott Says:

    Why should they be allowed to pay the fee as a gift card? That ensures that the public will spend the money at WalMart, where they again will make a profit on that money (assuming a typical retail markup up 100%, that means that of that $0.47 "you" get, it only actually cost WalMart $0.24 less overhead).

  2. Moroni Says:

    It's a gift card for walmart. Kinda hard not to spend it in one place, huh?

  3. Jon @ OMG Tech Deals Says:

    thats like having your older brother retrieve something a fellow fifth grader stole from you, and after your brother retrieves the item, he keeps it….