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Wal-Mart's Movie Download Headache

Monday, September 25th, 2006 at 7:55 AM - by

Back in August - before Apple launched its movie download service - reports surfaced that Wal-Mart was pressuring Hollywood studios to offer better wholesale DVD prices so that it could better compete with the iTunes Store's pending move download service. On Friday, the New York Post reported that Wal-Mart threatened the studios with retaliation if they sign on with Apple.

Wal-Mart's fear is that Apple's movie sales could cut into its lucrative DVD sales numbers. Those numbers translate into dollars for the studios, too, since Wal-Mart is responsible for a substantial portion of all DVD sales. The company is expected to account for 40 percent of the DVD movie sales for 2006.

The possibility that Wal-Mart could cut back on, or even stop selling, some movie titles may have been enough to keep most studios from signing on with Apple's iTunes Store movie download service. One unnamed studio executive is reported to have said "[Wal-Mart] threatened to hurt us in terms of buying less products."

Wal-Mart, however, said the reports are wrong. According to Reuters, the big box retailer has no intention to dissuade Hollywood executives from striking deals with Apple.

A Wal-Mart spokesperson commented "Customers want to watch movies and they want to be able to make the choice when and how they want to view them. While we recognize there are various current and potential providers of this service, we are not dissuading studios from conducting business with other providers."

It may turn out that movie download services won't have an impact on DVD movie sales. Wal-Mart's research apparently indicates that online movie buyers are not the same customers that purchase DVDs in stores.

In the end, Wal-Mart's sizable DVD sales is something that movie studios do not take lightly. Regardless of whether or not the retailer is threatening movie makers, the studios are likely to sit back and wait to see how Wal-Mart's reaction to Apple's movie download service plays out.

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Wordman said:

member since 24 Apr 2006 with 4 posts, unranked, send him a message or view his profile

Mon Sep 25, 2006 10:15 am

There's also a good chance that some customers would do both: download a movie *and* go to Wallyworld to buy the DVD, much the same way I download songs and occasionally buy the CD, so I have a hard copy back up of the music I really like.

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Bosco said:

member since 03 Jun 2002 with 1002 posts, unranked, send him a message or view his profile

Mon Sep 25, 2006 10:24 am

There is an old saying in computer science... "Never underestimate the bandwidth of a station wagon." With 384kbps DSL, it now takes about 4 hours to slurp down a 42 minute TV episode from iTunes Store. The quality is nice (better than DVD, not as good as HD). I suspect that iTunes Store is really going to cut into TV show DVDs. Instead of spending $30 at one shot on a season of your favorite show, buy a show at a time for $1.99 and watch it on a bad TV night every week.

BTW, iTunes Store has Firefly now. Talk about the greatest show ever cancelled. I had heard that, but wasn't ready to plunk down $30 on the DVD even though I loved the sequel movie Serenity. If the TV series sucked or looked low-budget compared to the movie, why buy the whole thing? But it's really great. Worth every $1.99 and overnight download so far...

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Edison Carter said:

member since 10 Aug 2006 with 228 posts, unranked, send him a message or view his profile

Mon Sep 25, 2006 10:34 am

Wordman wrote:
There's also a good chance that some customers would do both: download a movie *and* go to Wallyworld to buy the DVD, much the same way I download songs and occasionally buy the CD, so I have a hard copy back up of the music I really like.

You can make a backup of downloaded music, either as a data disk or a music disk. Kind of works for video too. My wife missed an episode of NCIS last week so I downloaded it from the iTunes Store. I also burned a copy on to a disk and gave it to her to watch on her iBook which is an "authorized" computer for my account. Now I couldn't make a video disk that we could use on a DVD player, it was a data disk that played under iTunes, but it is still a backup.

As to shopping for hardcopy music, and video disks, I often dig through the markdown bins at Big Lots!, Fry's, Ross, or where ever. You can find some classic gems in there and the stuff advertised on late night TV.

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A guest said: (hide)

Mon Sep 25, 2006 10:45 am

$1 mil in download gross in the first week for iTMS is impressive, but to the studio bosses, 1 M/wk is chump change. They won't bite on iTMS distribution.

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A guest said: (hide)

Mon Sep 25, 2006 11:09 am

Guest wrote:
$1 mil in download gross in the first week for iTMS is impressive, but to the studio bosses, 1 M/wk is chump change. They won't bite on iTMS distribution.

Why not? iTMS for music was slow at first, then turned into a juggernaut (1.5 billion songs sold so far). It may take time, but downloadable movies and television will become increasingly popular.

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Semeyaza said:

member since 29 Aug 2002 with 130 posts, unranked, send him a message or view his profile

Mon Sep 25, 2006 11:41 am

Interesting...

Wal-Mart is afraid of Apple, but do not even mention the Amazon movie store... evidently they don't think it's a viable store for movies, unlike the Apple one.

Cheers

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Biff said:

member since 08 Apr 2004 with 1479 posts, unranked, send him a message or view his profile

Mon Sep 25, 2006 1:47 pm

Guest wrote:
$1 mil in download gross in the first week for iTMS is impressive, but to the studio bosses, 1 M/wk is chump change. They won't bite on iTMS distribution.
LOL. Yeah those studio execs sure hate money. They know that Walmart doesn't have a leg to stand on. The studios will choose both. Both equals more money and that is the language they speak. Walmart will of course continue to sell DVDs and iTS will start selling their movies too. It's not very complicated. Well unless Walmart would prefer millions of people go to other stores this holiday season to buy DVDs. Gee I sure hope they don't spend any other the REST of their disposible income while at those other stores.

Oh I'd also like to correct a glaring technical error made by another poster in this thread. iTS videos (both TV and movies) are LESS than DVD quality. They are lower resolution than standard widescreen DVDs and more compressed than DVD video.

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A guest said: (hide)

Mon Sep 25, 2006 2:26 pm

Biff wrote:
Oh I'd also like to correct a glaring technical error made by another poster in this thread. iTS videos (both TV and movies) are LESS than DVD quality. They are lower resolution than standard widescreen DVDs and more compressed than DVD video.

iTS videos are slightly lower resolution than DVDs. In most cases, the visual differences are very minor. BTW, the iTS videos use a more advanced compression codec (H.264) than DVDs (MPEG-2). At the same perceived image quality, H.264 can provide superior compression. In other words, greater compression does not necessarily mean poorer image quality.

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A guest said: (hide)

Mon Sep 25, 2006 2:33 pm

If is it's true about wal Mart's alleged pressure - that is blatantly ILLEGAL. It is restraint of trade and for all those yahoos who think the ipod/itunes is a "monopoly," this is a a repeat of MS - when you leverage your position (walmart is #1 in DVD & CD sales) to prevent competition - that is when you move your LEGAL monopoly to an illegal position. Wal Mart better hope that attorney general's around the country have NOT read the rumors and launch an investigation.

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Funkocola said:

member since 25 Sep 2006 with 9 posts, unranked, send him a message or view his profile

Mon Sep 25, 2006 3:17 pm

Anonymous wrote:
If is it's true about wal Mart's alleged pressure - that is blatantly ILLEGAL. It is restraint of trade and for all those yahoos who think the ipod/itunes is a "monopoly," this is a a repeat of MS - when you leverage your position (walmart is #1 in DVD & CD sales) to prevent competition - that is when you move your LEGAL monopoly to an illegal position. Wal Mart better hope that attorney general's around the country have NOT read the rumors and launch an investigation.

Not to mention that it's basicly extortion.

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darkone said:

member since 05 Jun 2006 with 12 posts, unranked, send him a message or view his profile

Mon Sep 25, 2006 3:20 pm

Anonymous wrote:
If is it's true about wal Mart's alleged pressure - that is blatantly ILLEGAL. It is restraint of trade and for all those yahoos who think the ipod/itunes is a "monopoly," this is a a repeat of MS - when you leverage your position (walmart is #1 in DVD & CD sales) to prevent competition - that is when you move your LEGAL monopoly to an illegal position. Wal Mart better hope that attorney general's around the country have NOT read the rumors and launch an investigation.

Being number one does not make you a monopoly. Now if Wal-Mart had say, 75% or more of the DVD business, then I might agree.

Personally I quit shopping at Wal-Mart years ago due to the way they treat their suppliers and employees.

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iJack said:

member since 13 Jun 2001 with 313 posts, unranked, send him a message or view his profile

Tue Sep 26, 2006 12:27 am

Funkocola wrote:
Anonymous wrote:
If is it's true about wal Mart's alleged pressure - that is blatantly ILLEGAL. It is restraint of trade and for all those yahoos who think the ipod/itunes is a "monopoly," this is a a repeat of MS - when you leverage your position (walmart is #1 in DVD & CD sales) to prevent competition - that is when you move your LEGAL monopoly to an illegal position. Wal Mart better hope that attorney general's around the country have NOT read the rumors and launch an investigation.

Not to mention that it's basicly extortion.

No one mentions that WalMart has flatly denied doing any such thing as sending DVDs back or threatening to boycott the studios that go to the iTunes Store.

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A guest said: (hide)

Tue Sep 26, 2006 3:20 am

iJack wrote:
No one mentions that WalMart has flatly denied doing any such thing as sending DVDs back or threatening to boycott the studios that go to the iTunes Store.

Yeah. On account of not believing Wal-Mart very much in anything they say, self-serving or otherwise.

Sorry, one of the perils of being one of the most anti-worker, anti-small business corporations ever created.

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kdjsmith said:

member since 24 Aug 2002 with 7 posts, unranked, send him a message or view his profile

Tue Sep 26, 2006 9:27 am

I worked for Wal-Mart for ten years. They send movies back all the time. They order more than they think they need for a new release, and a month after it's been on sale they send back any excess to the studios. Heven help when a new release, over-ordered as it was, sells out in the first day or two - that poor store is buried in shipments to try to keep up with percieved demand by the weekend. They do weekly updates to the video racks, and as titles become older and move further down the New Releases sections and finally get absorbed into the "library" sections or move out into the Action Alley racks any excess gets sent back. When a title is taken out of the store, any copies get sent back. This is nothing new, and is something the movie studios support and send reps in to assist with. There's only so much space on the rack for titles, and only so many titles a store can carry. Now, switch to the iTunes distribution method - always in stock, always available for download. Titles don't get sent back. This was Wal-Mart's concern, by some reports - they're not worried about losses in new release sales, which are often loss-leaders and sold at less than cost the first week or so to compete with Best Buy, Circuit City, Target, et al. They're worried about all those "library" titles, the incidental sales, the copies of STAR WARS I thru III that someone might have picked up a few weeks ago along with their reissues of IV thru VI. The ones they make money on. Think about it, who in their right mind would load a 4'x4'x4' bin full of DVDs? How shoppable is that? Can you easily sort through it and find what you're looking for? When I ran the Electronics department, I resisted setting that thing up, thinking no-one would waste time digging for something that might be in the "2 for $11" bin, and tried to present the titles on a four-way, the 4'x4' shelved display. It didn't hold as much, but I reasoned people could see the titles better. When they finally convinced me to switch to the dump bin, sales on the "2 for $11" stuff tripled. WHY??? People like to dig, and while they're digging, they maybe find two or three other movies they like, and buy them too. But even at $5.50, the store makes money on all those titles. That's where iTunes might hurt them. According to a chart I saw, Wal-Mart, Best Buy, Target, Amazon and iTunes are the top five music sellers, and smart money says iTunes is going to be at least fourth next year. They're obviously doing something right.

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