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Apple in Talks with Wal-Mart over Movies
Alex, Variety.com writes "If you can't beat 'em ... Apple and Wal-Mart are in discussions over an alliance that could allow the giant retailer to profit from iTunes video downloads. Apple would then gain access to titles from every major studio." From the article: "A deal could take the form of a digital download 'coupon' that would allow consumers to buy movies, TV shows or music on iTunes with Apple paying the retail giant a percentage of the proceeds, one industry insider said ... Hollywood has been closely watching Disney's relationship with Wal-Mart in the wake of the deal. When Wal-Mart caught wind of talks between the studios and Apple, it threatened to cut its order of 'High School Musical' over the summer. Disney CEO Bob Iger did the deal with Jobs anyway, and the rest of Hollywood has been watching to see if and when the other shoe drops."
Apple would then gain access to titles from every major studio.
This is a huge jump in logic. It's assuming that the reason why Apple doesn't have access to these titles now is strictly because Wal-Mart is competing with iTunes. The fact remains Apple will still have to hack out distribution deals often on a per-title basis, and many of the studios don't want to offer most of their movies for download at all. It's got nothing to do with Wal-Mart.
All this deal would do is remove one of the smaller obstacles Apple faces in getting more films on iTunes (and my bet is Wal-Mart is probably the least of Apple's headaches). The big obstacles - copyright, DRM, distribution rights, contracts between various parties, etc. - would still remain.
Wal-Mart's aleged threat to cut Disney orders if Disney started selling through iTunes would, in an honest administration, be an instant anti-trust lawsuit by the Department of Justice.
Its perfectly legal and valid for Wal-Mart to squeeze its suppliers when they sell to Wal-Mart, but to threaten suppliers because they are selling through other venues, when Wal-Mart has an unquestioned monopoly in many areas, would be asking for intervention.
However, with the current DoJ completely toothless, and prefering Seattlements (eg, the Microsoft anti-trust resolution) to actually going after entrenched business interests (especially hard-core republican supporters like the Waltons), Wal-Mart doesn't need to worry.
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Got a lot of friends who've been working for Wal-Mart for years and have been getting the shaft the whole time. Wal-Mart does not care about its employees or suppliers. I work in the health-care industry, particularaly with insurance providers. Wal-Mart contracts through Blue Cross of Illinois for benefits of their 'full-time' work force. (Meaning 40 hours a week, but they won't pay you overtime if you work 60 one week and 20 the next). You want a bad benifit package, ask a Wal-Mart employee. The government offers far better insurance for people below the poverty line and for much cheaper. And your average full-time (non-manager) Wal-Mart employee is at poverty-level income.
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Digital downloads are the ultimate in impulse purchases. Say, for example, you're sitting at home on a weeknight, there's nothing on TV, and you have too much time on your hands before bed. Do you:
a) Get dressed, get in your car, drive to Wal-mart, purchase a DVD, wait in the checkout line, drive home, and pop it in the DVD player; or
b) Open iTunes, browse the movie/TV selections, download and watch your movie/TV Show
If you've got broadband, "b" is almost always preferential. Option "a" is just too much of a hassle, and the store may be closed anyway. (Especially for those poor late shift workers.) The only thing that holds consumers back on making that sort of purchase is price. No matter what studios think, a digital download does not have as much intrinsic value as a packaged Disc. Which means that if the consumer feels that the digital price is too close to the price of the physical copy, they're not going to spend the money. While studios may think this means that the consumer will go purchase the DVD, more likely it means that they'll purchase NOTHING.
If they wanted the movie bad enough to get a DVD, they would have gotten a DVD rather than a digital download. DVDs have more value as "keepsake" items due to their special features and permanent, physical storage. Thus digital downloads will be likely to complement DVD sales rather than usurp them. Which means that Walmart should keep carrying Batman Begins, but they can drop Ultraviolet.
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Apple's Wins:
...
1. Walmart sells a boatload of iPods. Apple probably wants to keep Microsoft out of the game... Given Walmart's purchasing power, Steve will insist on two things: a)squeeze Microsoft on cost margins further exacerbating Zune's losses b)iPod gets premium shelf spacing other players including Samsung and Microsoft get stored in the back c)iPod accessories get better placement (taking it further perhaps extending Apple's store within a store concept from CompUSA to Walmart d)leverage for margin negotiations over iPod sales
2. Fairplay.... Walmart does not take backstabbing lightly. Microsoft's strategy to drop PFS (remember Walmarts 88cent store is based on PFS) support and create a new DRM standard reeks of screwing their partners. Sure Microsoft thinks they can get away with it because they are a Monopoly. But Walmart is a monopsony.... when a monopoly meets a monopsony its like Godzilla meets Mothra..... Walmart is going to put its weight behind Fairplay... this will create quite a bit of momentum for Apple
3. Apple gets to have major studios onboard with Walmart's support