updated 05:30 pm EDT, Fri September 22, 2006
Wal-Mart threatens studios
A dark tide appears to be looming over digital movie downloads, as word came today that retailer colossus Wal-Mart has issued warnings of retaliation to some of Hollywood's key players, should they elect to sell movies through Apple's iTunes service. Wal-Mart last year sent back "cases and cases" of DVDs to Disney after the animation company announced it would offer episodes of its hit shows "Lost" and "Desperate Housewives" on iTunes, according to a report from the New York Post. Hollywood studio executives say Wal-Mart has threatened to strike back if they go into business with Apple, and though the Cupertino-based company is currently offering movies exclusively from Disney studios, other players in the movie industry want to follow in Disney's footsteps. "We all want to be in the Apple business," a high-level executive at a major movie studio said.
Apple's pricing of $9.99 to $14.99, however, falls below Wal-Mart DVD prices. Studios typically charge Wal-Mart $17.95 (wholesale) for new DVDs, but Apple is paying Disney roughly $14.50 wholesale for each movie. Hollywood studios don't wish to upset their largest sales outlet -- Wal-Mart -- just prior to the holiday shopping season, which is expected to rake in about $5 billion in DVD sales in the fourth quarter.
Wal-Mart executive David Porter, who oversees the stocking of the retailer's CD and DVD shelves, recently contacted numerous Hollywood studios to warn of "serious ramifications" if the studios pair up with Apple to offer digital movie sales.
"They threatened to hurt us in terms of buying less products," said one studio source.
That source also claims Apple CEO Steve Jobs asked Wal-Mart chief Lee Scott to moderate his stance during a recent phone call, according to the report.
"What they probably will do is not hurt Disney on new titles, but will buy less of their library titles," one source said.
Library titles constitute most of Wal-Mart's revenue from DVD sales, as the store usually cuts prices of new releases below cost in an effort to lure consumers to its shelves.