Online DVD Rental Settlement: Why Walmart Is Sending Netflix Customers $12 Gift Cards

Online DVD Rental Settlement Emails Are
Ken Wolter / Shutterstock.com

Close to 750,000 U.S. consumers received a strange-looking email Thursday, offering them a Walmart gift card for $12.32. The sender: an ominous entity called Online DVD Rental Settlement.

The seemingly unsolicited cash offer raised suspicions with quite a few consumers who expected it to be some sort of phishing scam, initiated by bad actors looking to spread viruses or trick them into revealing personal information. But unlike those emails from dethroned royalties that promise large cash payments, this one is real, and has its roots in a failed attempt by Walmart to take on Netflix.

Back in 2002, Walmart was realizing that its DVD sales were being cannibalized by Netflix’s DVD subscription service. That’s why in the fall of that year, Walmart launched its own DVD subscription service, promising consumers unlimited monthly rentals for $18.86 a month.

As the obscure price point indicates: It was a test, and one that didn’t fare so well. Walmart gained just 60,000 subscribers, and in 2005, it decided to shutter the service and transfer those customers to Netflix. In exchange, Netflix agreed to pay Walmart a 10% share of revenue plus a bounty for each subscriber. Netflix also agreed to promote Walmart’s DVD sales.

That deal drew the ire of some Netflix customers, who mounted class-action lawsuits against both companies in 2009. Their allegation: that the pact between both companies prevented competition and thus led to higher prices for Netflix’s DVD rental plans.

Netflix fought the lawsuit, and eventually won. Walmart instead agreed to settle and distribute a total of $27 million to eligible Netflix customers who could have been harmed by the deal. The company informed a total of 35 million consumers who had at one point subscribed to Netflix’s DVD subscription service.

Consumers had to submit their claims by March 2012, and more than 1.1 million actually did so. Many of them opted to receive an emailed coupon instead of a check for sheer convenience — and also because they probably didn’t expect the lawsuit to continue until early 2015, when a court threw out final challenges against the settlement, paving the way for Walmart to send out its coupons this week.

The irony of it all is that the entertainment landscape has changed radically since the 2005 pact between Netflix and Walmart. There are only 5 million DVD subscribers left at Netflix — down from 20 million at the end of 2010 — whereas close to 70 million people around the world now subscribe to Netflix’s streaming service.

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  1. Valerie says:

    I got the email for $3.66. So is this still real?

  2. Anonymous says:

    My email only said I would get $3.66.

  3. Vicki says:

    I also got a check but how did you guys sign the back of it. Please help

  4. Ben says:

    I got a physical check. Woot! $12.32 and I’ll take it :)

  5. Amy Morgan says:

    I also received a check yesterday for $12.32 that will be deposited today.

  6. Sarah says:

    I got an actual check for $12.32 …..which I will be depositing tomorrow.

  7. PI says:

    I got a chk vs a gift card in the mail today. Sushi on me@Rotsen : )

  8. Nora says:

    Let’s see. About 1.1 million folks put in a claim, they pay $12 a claim, and that comes to about $13.5 million paid out, which is about half of the $27 million they agreed to pay out. I guess the lawyers got the other half. And all this took place quickly in the space of only six years. Ya gotta love it.

  9. Cort says:

    Yeah doesn’t really seem like Walmart is losing when u can only spend it at Walmart c

  10. Deb says:

    mine only rang up as .03 cents when I made a purchase. The cashier scanned barcode.

  11. Terri says:

    Thanks for explaining that. The email really did look strange and the sender really sounded “ominous”!

  12. ok, I’ll take the $12.32. That’s a free Friday lunch at the sushi place I like. :)

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