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."

Comments

Jump in logic

[badasscat]

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.

Re:Jump in logic

[Amouth]

Or diffrent once based on who gives in to them..

walmart has heavy handed tatics .. they can ruin companies by just placing an order and then canceling it.

something most people don't know is that the way walmart does supplier contracts is they place the order - it is delivered - they only pay for the product once it go out the door. While the items are sitting on the shelf or in the back room walmart has no money in them.. like wise when someone returns some thing it goes back to the supplier and walmart gets a credit for it.. so if they order 1000000 widgets and just let them sit in a warehouse for 3 months and then just send them back the suplier paid to make and ship 1000000 widgets and then 3 months later got them handed back to them and never say a dime while the whole time they have all their money on the line.

they break companies.. i have heard stories from people that work in their ware houses about how they will place orders and then when they arive hold them.. and wait then call the supplier back up and demand a reduction in the price or they will send them back because they don't feel it will sell well. at that point unless the supplier is huge they don't have much choice. The way walmart does their suppier contracts makes this all legeal - and they woln't use you if you don't accept the terms..

Not sure this means what I think it means

[joshetc]

But if it does, it would be nice to be able to download a movie then pick it up in the store at a later time for only slightly more than the cost of the DVD. Instead of spending $10 for the download and another $20 for the dvd you could spend something like $22 for both in a "package"

Re:Not sure this means what I think it means

[DeadChobi]

I've got a solution for that. Simply buy the DVD, then rip it and encode it. Presto, you've got your digital download and a hard copy all in one.

Re:Not sure this means what I think it means

[AKAImBatman]

Simply buy the DVD, then rip it and encode it.

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.

If you can't beat 'em?

[dougman]

I'm not sure I see why this is a "If you can't beat 'em - Join 'em" deal. Was Apple trying to beat Wal-Mart?

Seems to me that they're just looking to a different channel to market their product since the first channel wasn't interested.

Sweet deal!

[Rob T Firefly]

So, does this mean I'm entitled to part of the profits all my competitors make, on basis that they're taking money I could have made had they not had a more sucessful and up-to-date business model?

Note to self: sue everyone!

In a honest administration, Wal-Mart should worry

[nweaver]

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.

Freaking Christ.

[JKConsult]

It's a wonderful thing for Wal-Mart and I don't really fault them for doing it, but this is basically extortion on a grand scale. A new delivery model threatens the very thing that gives Wal-Mart its advantage (their distribution system), and instead of competing straight-up, they threaten their suppliers to the point that the new distribution model has to throw them some money to STFU. So the new distribution model has a chance to compete on a level playing field (being able to offer the same products.) Again, well-played by Wally World, but just sickening.

He does have some

[paranode]

After all he's in deep up to his iBalls with this one.

Is this premature?

[dschuetz]

I'm certainly not a Marketing Genius, but it seems to me that if the iTunes store really did sell $1,000,000 worth of movies in the first week, then maybe other studios will realize that pissing off Wal-Mart isn't such a big deal after all.

If I were in Apple's place, I think I'd wait a while before giving in to any major retailer. On the other hand, I don't know how gift cards sold at retailers work -- if everyone else who sells an iTunes gift card gets some cut off the top of the cost of the card, then I don't see any issue letting Wal-Mart play in that game, too (which, according to the article, they don't at present).

Didn't a lot of studios initially balk at the idea of TV over iTunes, fearing it'd hurt DVD sales? Somehow I think that movies would go the same way, with initial reluctance, phenomenal sales of the initial Disney titles, growing acceptance, and finally becoming just another standard sales channel.

Re:In a honest administration, Wal-Mart should wor

[steveo777]

Wal-Mart sucks the essense out of every product they buy. They've put more companies out of business by buying their products than by moving into small towns and setting up shop. I hate Wal-Mart and refuse to buy anything there unless absolutely necessary. If Apple starts dancing with the Devil, I'm probably out of ITMS for good. Sure, I'll let them give me iTunes updates and update my iPod, but I will stop buying music from them. I never purchased movies from iTunes, but this would definately stop me.

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.

Apple has a lot to gain....

[d0n quix0te]

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 ...

Hardly appropriate

[thinkzinc]

Job's balls have nothing to do with this issue. Wal-Mart sells 40% of the DVD's from Hollywood. The comapny has threatened the movie studios and so far they are not willing to work with Apple. The new move by Wal-Mart shows that they are an extortion racket. They are also the bigger player. Apple does not have the upper hand. And you should also consider that Wal-Mart can launch its own service. They do not need Apple.

Only for BIG suppliers

[alexhmit01]

Those deals are only for the BIG suppliers with SHORT turn-around deals. Wal-mart is a vicious customer, but can deliver HUGE volumes. They have also moderated themselves, as suppliers stopped working with them when they got too cutt-throat. The buyers have been reigned in, because big accounts like Rubbermaid became problematic. A friend in marketing at Rubbermaid was telling us that while the "buy on sale," where Walmart accepts the inventory at their cash register has pushed the inventory holding risk to the suppliers, it's only on products that are sold within 2-3 days of being in the store. Wal-mart doesn't waste shelf space on items that don't turn-over.

The suppliers are actually happy with the arrangement, because it's a deal point, and they can extract better pricing by working with that system. While I'm sure that Wal-mart has played hardball as you described, it's a little overstating to suggest that that is the normal way of doing business.

My friend also suggested that the buyers have been becoming less adversarial, and trying to produce more win-wins. Sure the Wal-mart culture is there... normally buyers get taken out to lunch with salesmen who entertain them... a bit of sneaky corruption, the buyers are pushed to gives a little bit of the company's money to get well treated by the salesmen. At Wal-mart, salesmen go to Wal-mart HQ, no meals are allowed. All negotiations take place in a small room at Wal-mart HQ. By keeping their buyers from trading favors with salesmen, they keep their costs down.

Walmart does MANY things... they are aggressive, but not necessary under-handed. However, they have a LOT of maneuvering room in the industry, and if they can make real money by selling Apple iTunes movies in the store, they WILL bring market pressure on the studios to play ball.

Alex