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Target warns studios on DVD pricing

updated 11:55 am EDT, Mon October 9, 2006

Target warns studios

Discount retailer Target -- which accounts for about 15 percent of DVD sales -- has warned major movie studios that it may "reconsider" its investment in the DVD business if it doesn't receive "equitable pricing." In a letter to major studios last month, Target detailed its concern that new movie downloading services such as iTunes will receive lower prices from studios on electronic copies of movies, according to a report from the Wall Street Journal. Target CEO Gregg Steinhafel suggests in the letter that the retailer may cut back on marketing disks, promotional programs, shelf space, and signage. The letter follows a similar warning from retailer colossus Wal-Mart, which reportedly threatened to retaliate against studios if they partnered with Apple to offer digital movie downloads at lower prices than DVDs on shelves. Wal-Mart quickly disputed reports that it had threatened studios, however, and was later rumored to be in talks with Apple over possible digital content offerings.




by MacNN Staff

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Comments

  1. tomodachi

    Joined: Dec 1969

    0

    It's funny

    That retailers can so easily threaten the studios, when, in theory, they're supposed to be profiting from the sales of those DVDs just as much as the studios are. Are the studios practically begging the retailers to carry their products?

  1. Interlard

    Joined: Dec 1969

    0

    Well, duh!

    Target (and everyone else) WILL start to sell less physical DVDs, as more people are happy to download their movies.

    Welcome to the free market, Gregg. Where have you been?

  1. Foe Hammer

    Joined: Dec 1969

    0

    Funny ...

    ... did Target warn the music industry about music downloads vs. their CD sales? If not, why not? If so, let me tell you how that turned out ... :-)

  1. macbarry

    Joined: Dec 1969

    0

    HD-DVDs

    This noise from retailers over cheaper movie downloads would evaporate if the electronics industry could get their greed in control over an HD-DVD standard and start mass production of cheaper HD DVD players. HD video files are simply too large to be easily downloaded by the average user and so that will mean that only SD DVDs will be available as downloads for the near future - leaving the HD DVDs to be sold as regular (high margin yielding) disks by the retailers. With the explosion in the sales of HDTVs the market for pre-recorded HD content is huge and growing larger - yet there are very few HD movie titles or reasonably priced players on shelves to satisfy this demand. SD DVDs should have been history long ago yet here we all sit - still waiting...

  1. ender

    Joined: Dec 1969

    0

    No Threat...Yet

    Movie downloads really aren't a threat to physical CD sales for a few years yet. On my supposedly 3 Mbps DSL connection, it takes over 1.5 hours to download a 45 minute TV show. It's going to be awhile before enough households have fast enough connections to make movie downloads as popular as music downloads. And I'm going to guess that many (most?) of the households who have fast enough connections now are probably the ones most likely to order movies from Amazon or other online services anyway. So neither Target or Wal-Mart are really going to be losing sales to the download services. They are just using iTunes as the excuse to try and squeeze more profits from the studios. The threat to stop selling DVDs is empty, and hopefully the studios will just ignore it.

  1. cptodd

    Joined: Dec 1969

    0

    Tower Records Liquidated

    Did anyone notice that Tower Record's assets were liquidated today? I can see why both Walmart and Target are going on about this as they are. Do I sympathize with them? NO! But I can see their point. They are out to save themselves. However, the answer is to change with the times not act as they are. To answer someone else’s question. . . They sell so much product for the studios that the studios are obliged to be mindful of where they step. In essence, the studios must take target and walmart seriously.

  1. jedi1yoda1

    Joined: Dec 1969

    0

    physical media

    I think too one thing thats overlooked is the fact that digital media requires no packaging, where as physical media has a plastic disc, case, paper inserts, shipping, etc. It probably costs physically more (although minimal in large quantities) to get a DVD to a retailer vs. selling it over a digital medium. Most of these retailers are paying what, maybe $1-2 dollars over what Apple pays per DVD, and in the massive quantities that are ordered, I realize that the $1-2 dollars adds up, but I think this should be looked at as "Why should Apple pay what a retailer pays for a physical disc when they get no physical media to distribute?" When I buy a CD from iTunes, I don't expect or feel that I should get physical stuff, but I expect it to cost less cause I'm not getting that physical stuff with the CD.

  1. migs647

    Joined: Dec 1969

    0

    RE: physical media

    "When I buy a CD from iTunes, I don't expect or feel that I should get physical stuff, but I expect it to cost less cause I'm not getting that physical stuff with the CD."

    EXACTLY. Why is this so hard to see?

  1. G4_Kessel

    Joined: Dec 1969

    0

    Missing the point...

    A physical DVD has thing that appeal to consumers that downloads do not. Things like the case and cover... as well as extra features such as deleted scenes etc. Also... a DVD is better quality than a downloadable version. I do not see this as a "threat" to DVD sales to any retail store. Personally, I thin the cost of the downloadable movies is too high for what you get. I can go BUY a physical DVD fro the $10 price and have more bang for the buck. That's my 2 cents...

  1. wymer100

    Joined: Dec 1969

    0

    Bandwidth

    Apple does have to pay for bandwidth so it's not total profit vs. physical disks. That said, I would imagine that downloads aren't going to make a dent in DVD sales from Target or Walmart anytime soon because the internet speeds aren't there, yet. They are simply getting in front of the technology now so they aren't playing catch-up down the road, like with CD sales.

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