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Wal-Mart threatens studios over iTunes

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.




by MacNN Staff

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Comments

  1. suhail

    Joined: Dec 1969

    0

    s**** Walmart

    I can wait for the day when they tank!

  1. bullfrog184

    Joined: Dec 1969

    0

    two can play at this game

    it would be most unfortunate if shipments of the #1 family of digital music players failed to arrive at wal-mart, especially in time for the holiday season. :P how's that for subtlety?

    this is ridiculous behavior, coming from wal-mart. the legal market for downloading movies is in its infancy, and if the legal music downloads is any indicator, people will continue to buying physical dvd's at wal-mart and other retailers for years to come. legal downloads are, and will continue to be, a small niche market.

  1. jarod

    Joined: Dec 1969

    0

    Hot air

    Walmart will have no choice but to compete. All this bs talk is just that...BS. What they don't buy, Apple will sell, so there is no real loss to the movie industry. These are different times Walmart; get over it and deal with it.

  1. UNTeMac

    Joined: Dec 1969

    0

    common tactics

    Walmart uses these tactics all the time. As the largest retailer, they frequently threaten or actually do stop buying a company's product if they don't do what Walmart says. They've put people out of business this way because companies, in order to be competitive, must use Walmart as retail outlet. Walmart demands a certain price, and they get it.

  1. legacyb4

    Joined: Dec 1969

    0

    unbelievable tactics

    amazing that a single retailer, even walmart, can be so openly aggressive without fear of retaliation. didn't another big company get in trouble for something along these lines... 'use us or you don't get to play with us'?

  1. Andy Cotton

    Joined: Dec 1969

    0

    wow

    Isn't that anti-competitive in some legal sense? Only a monopolist could hope to wield such power. otherwise won't everybody just get their movies elsewhere? If I were a studio I would look to the future, not the past.. When this goes international the sales can only spiral up. And up.

  1. jpellino

    Joined: Dec 1969

    0

    Ask vlasic pickles...

    ... how this works. Walmart's demands and retailation drove their profits down even as sales went up. The eventual path for Vlasic was receivership.

    Their scale is truly staggering. The business that Home Depot does in a year, Walmart does in three months.

    Until the market shifts to downloads, Walmart has the biggest lever. When it finally shifts, though - they'll need to be in the pile or under it. They're likely looking at the relative success of iTunes and their download service and realizing they can't afford to be nice this time.

  1. ianaberle

    Joined: Dec 1969

    0

    Walmart's Market Share

    I think I heard on NPR this morning that 40 percent of all DVD sales are through Walmart. With that selling power, they can do what they want. What is interesting how they are singling out Apple. I have not heard anything about the studios using Amazons or others services getting this type of treatment.

  1. JulesLt

    Joined: Dec 1969

    0

    Ordering less DVDs

    Well, of course, if they're going to sell less, they will order less, but unlike suppliers of chickens, tomatoes and potatoes, Wal-mart have a problem with movie studios. They can't get the SAME product from a rival. Sure, they can threaten to promote Dreamworks animations over Pixar, but consumers generally go out to buy a specific DVD and if Walmart don't stock it, they will go to Target or Amazon.

    What they don't do at Xmas is get the kids a completely different film because Walmart had a hissy fit and refused to stock 'Cars'. And if they start refusing to stock a good library of back-catalog titles, they will drive consumers towards downloading - which is far better suited for that 'long tail' market.

  1. firebird06

    Joined: Dec 1969

    0

    Oy vey

    I work for Wal-Mart (not exactly happy of the fact, but in college, you take what you can get) but they pretty much secured that I won't buy anything I can get somewhere else from them by making this move. and clearly Disney doesn't care, they iPod seems to be doing more for them then Wal-Mart currently is.

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