Netflix Modifies Class-Action Settlement
By David Louie

Feb. 22 - KGO - Hundreds of thousands of past and present Netflix subscribers are close to getting a free upgrade on their DVD rental plan.

Attorneys for DVD movie rental giant Netflix and some of its subscribers said in court they're close to a settlement. The two sides have been embroiled in a controversy pitting its avid movie watchers and casual ones.

Netflix was accused of a practice called throttling -- providing two levels of service for the same $17.99 per month fee. It amounted to mailing out DVDs more slowly to high-volume renters.

The proposed settlement calls for Netflix subscribers before January 15, 2005 who are still customers to get a one-month upgrade worth $6.00. Those who quit will be offered one month free rentals.

But there was a sticking point. Netflix wanted upgraded customers to stay with the more expensive plan unless they cancelled after a month. The Federal Trade Commission intervened, and now that condition is out.

David Newman, Federal Trade Commission attorney: "They would have received a gift but it would have been in a sense a gift that kept on giving, or kept on taking in a sense. They would have been trapped in a more expensive plan than they had intended to."

The attorney representing the disgruntled Netflix subscribers says the settlement will send a clear message.

Adam Gutride, class action attorney: "There needs to be truth in advertising and that companies need to deliver what they promise."

Gutride estimates the value of the settlement could reach $85 million, depending on how many people take advantage of it.

Steve Swasey, Netflix spokesman: "We think this revised settlement is in the best interests of all the parties, particularly Netflix shareholders and customers."

Four-hundred-thousand Netflix customers have signed up for the settlement. Others will be given a second chance to participate or not.

One of other key details to be worked out is attorneys' fees for the plaintiffs. The final settlement hearing is scheduled for March 22nd.