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News
Target Unhappy with Movie Download Prices
Sunday, October 8th, 2006 at 3:00 PM - by Jeff Gamet
Big box retailer Target recently sent a letter to movie studios expressing concern that movie download services like the iTunes Store are getting better deals on movies. According to the Wall Street Journal, Target warned that if it didn't get the same pricing as movie download services, it would reconsider its investment in the DVD business.
Target's president, Gregg Steinhafel, is worried that movie downloads will undercut DVD sales - a market that earns about 15 percent of its revenue from Target. In the letter, he stated that he doesn't object to competition, but asked for "a level playing field."
If Target were to "rethink" its DVD business, it would likely cut back on retail shelf space, promotions, signage and other DVD movie marketing.
Earlier this year, Wal-Mart threatened to scale back its DVD sales because of the prices the studios were offering Apple. Wal-Mart accounts for the largest share of DVD movie sales, so studios tend to listen to what the company has to say. Wal-Mart's move, however, may have been an effort to negotiate better prices not only for in-store sales, but also for its own planned download service.
The combined sales from Target and Wal-Mart are expected to account for over half of all DVD movies sold in 2006. That combined sales strength may keep some studios from signing on with Apple until they are sure that big box retailers won't hurt their bottom line.
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