Retailers Pressure Studios on Web Deals

mikesd81 writes "Over at the Associated Press, there's an article about retailers pressuring movie studios for the same deals that online servies are getting. Target has sent a letter warning 'that Target might have to reconsider the amount of shelf space allocated for movies if studios undercut the wholesale price of DVDs by giving online services a better deal on digital offerings.' At issue is the low price some studios charge for films downloaded through such fledgling services as MovieLink, CinemaNow and Amazon.com's recently launched video store. The two-disc rerelease of Disney's 'The Little Mermaid' now retails for $14.87 at Wal-Mart and $14.99 at Target. The movie can be bought for $12.99 on iTunes."

Comments

Finally, a taste of their own medecine

[tentimestwenty]

Target and Walmart have been undercutting stores since they opened by monopolizing distribution. Now they're going to get a taste of their own business model.

Re:Finally, a taste of their own medecine

[flight_master]

I agree with you, and I find it rather interesting that Wal-mart (up here, we don't have Target, so I can't speak about them) is complaining about being under-cut. I've seen many small shops close up since they've been in this town. Glad to see they're getting some 'competition' on their terms.


Christian

Re:Finally, a taste of their own medecine

[coolgeek]

I don't see any problem with the studios offering the same price for a movie to these retailers, for the same product. But a DVD is not a digital download. There is no reason they should expect a lower price on a physical DVD, there are additional manufacturing, warehousing, handling and shipping costs. This is just some old tired dogs trying to hang on to the past. We never heard them complain about the cable companies getting a lower price on movies...

Re:Finally, a taste of their own medecine

[dangitman]

CSS is a kleenex. You can sneeze a hole in it.

How does that make it not DRM? Fairplay is also easy to break. So, I guess that means Apple doesn't use DRM? Hell, Apple even allows you to convert the files to a non-DRM format with their own software. The studios who sell DVDs don't give permission to do that, you have to break the (stupid) law to do that, but iTunes allows you to do it legally.

It's rather pathetic how people will rant about DRM, and then claim that DVDs are not DRMed because the DRM is easy to break. It doesn't matter how easy it is to break. Even more sad/hilarious, the same people will often say "DRM can never work" in their arguments, but then point to broken DRM as a justification for their using DRMed products. Hang on - didn't you just argue that all DRM is broken? So, if it's OK to use broken DRM, then it must be OK to use any DRM, as it is by definition broken, right?

Huh??

[joshetc]

Wasn't it the distributers that said the cost of the media and packaging made up a great deal of the cost of DVDs? I'd say the retailers are getting a pretty good deal with only $2 difference between the DVD + packaging + extras vs just a video file.

Re:Huh??

[Mr. Underbridge]

Bandwidth and server maintenance costs too, albeit not nearly as much as DVD packaging/shipping. Or does it?

Nowhere near. And if you're counting server maintenance, add the cost of the store, theft of stock (that gets passed on to the consumer too), and employee salaries, all of which cost much more for a real store.

WTF?!?!

[ImaNihilist]

PROBLEM: People are paying 25% less for a product of inferior quality. Wait...what's the problem? Shit on iTunes is still way to expensive considering the inferior quality, no hard copy, and the inability to burn to disc. Why don't they just stop playing around, and come up with a unified pricing model for all media. CD, DVD, iTunes, Amazon - $9.99. Make everything $9.99 and I'll go on a buying spree right now. I'll spend $1,000 in the next 20 minutes.

Re:WTF?!?!

[Rob T Firefly]

Plus, I can throw my DVD into a DVD player, computer, games console, or whatever else comes out in the future to support the format. I can enjoy whatever special features and extras are thrown in to appeal to my movie-geek side. I can even rip media from a DVD and freely convert it to any digital format I could ever want, in order to transfer to whatever video-playing gadgets I desire, and with no loss in quality other than what I dictate in the settings. And, I'm able to do this all from a physical medium that I only pay for once and for all, and that (barring accidents) will probably be around and viable longer than I will.

Can you say the same for any file on a hard disk, DRM'd or not? My oldest DVDs have outlasted something like five or six failed hard drives at this point, and I was a relatively late adopter of DVD.

2 bucks for a case?

[Fahrvergnuugen]

Doesn't it seem reasonable that a downloaded copy should be a little bit cheaper than a physical copy? I mean after all, when purchasing a downloadable copy of a movie you save the cost of:

• Stamping the disc
• Printing the cover & case insert
• Shipping the DVD through the distribution network
• Stocking the item
• Paying a clerk to check the item out

I'm sure there are more savings, those are just the few real obvious ones.

It sounds to me like the Tar*Mart's of the world are just being greedy.

Its an issue with obsolenence

[Moby Cock]

I am becoming increasingly frustrated with big companies whining when technology renders their business model obsolete. If Wal-Mart and Target want to retail movies, then do it in the manner that consumers want. Whining that a competitor is better at it is just sad.

Good companies evolve and move to where the markets are, they don't cry about how they are so hard done by because a competitor has them beat.

Re:Its an issue with obsolenence

[SnowDog74]

True but in the real world, ego stands in the way of sound business decisions. Men who wield power do so by applying their own version of the Reality Distortion Field to their otherwise commonplace ideas, regarding themselves as innovators for having re-invented the wheel for the umpteenth time.

The problem is that great ideas are hard to come by, and "insanely great" ideas are extremely rare... So, when a leaner, more agile company that operates according to this economy of scale comes along and tosses aside the "throw shit to the wall and see what sticks" business model, much to the befuddlement of many men who were utterly convinced that many mediocre ideas are more profitable than a few brilliant ones, they're very threatened.

They're not threatened monetarily... Bill Gates is still and will still be the richest man in the world. But he will never, and can never, be successful at the economy of scale that Steve Jobs has been... and, perhaps more importantly, he doesn't possess at all any of the brand image or personal image that Apple and Steve Jobs hold in the marketplace of ideas... and that has been a point of contention between the two for a very long time.

Most men, though they get older, do not get wiser... and this is why grown men in their 40s, 50s and beyond, running mega-corporations, continue to let their egos drive them down the abyss of terribly myopic business strategies.

Same reason RIAA and MPAA hurl lawyers at 12-year olds. Figuring out how to make brilliant movies is harder... much harder. Figuring out how to make a business case for their own companies when the internet renders recording companies and motion picture distributors unnecessary is simply beyond the capacity of these used car salesmen.

More than piracy, more than losing retailers, more than losing money, what frightens the modern corporate executive is the possibility of being unimportant.

Re:Its an issue with obsolenence

[swillden]

Good companies evolve and move to where the markets are, they don't cry about how they are so hard done by because a competitor has them beat.

Smart companies evolve and move to where the markets are *while* crying about how they're being abused, in the hopes that it will slow down the movement enough that they can stay ahead of it.

Not saying it's "right", but it's reality.

Re:Its an issue with obsolenence

[Vokkyt]

If Wal-Mart and Target want to retail movies, then do it in the manner that consumers want. Whining that a competitor is better at it is just sad.

Except that they are already doing it in a way the consumer wants. No, really, they are. Most consumers do not want to watch a .avi or .mp4 file on their computer; they want a physical DVD to pop into the $20 DVD player they bought at Target/Wal-Mart the week before. This is what I really don't get in all of this; Target/Wal-mart and any other retailer in the business is not really going to lose a market share it that it didn't already have before. There may be a minor loss, but the fact is that they are talking about two completely different products and two completely different consumer mindsets. When I think about the digital download services vs the DVD format, I think about who would purchase which. Take my Dad, for example. He's a pretty tech savvy guy for his age, and though he isn't out there downloading movies off Bit Torrent, he does hate paying $20 for a movie with includes three different language options and subtitle options, 5.1 surround sound options, wide screen vs full screen options, and the gillion little extras that come on a DVD. When he heard that iTunes and other services were offering you a movie, plain and simple, he was all ears. He is the target consumer for digital download services. Consider my Mom; she isn't as tech savvy, and enjoys all the extra features that come on DVDs. In fact, it's part of the reason she buys DVDs. You think you could get her to watch a full movie on a computer screen? Hell no. Unless it was a media center PC, she has no interest in it, since it's too much work just to watch a movie. This is the difference in consumer that I think Target/Wal-mart fail to see, and what they don't understand when they complain about digital download services.

Though I agree that Target and Wal-Mart are being very childish in this manner, the fact is that capitalism has never been a fair playing field, and this is sort of what it's all about. The fact is that the digital download services offer almost completely different content; their target audience is different, the intended market is different. Instead of whining about under-cutting their sales, the DVD retailers should promote their strengths; extras, language options, no need to download, etc, while they start making their own movie service options. Take the time to build business plans now while other companies deal with a relatively new plan (in a sense...), wait until broadband is better able to handle the movie downloads (speeds mainly), and then jump right in with both a digital service and also a "just the movie" DVD service in stores. Watch as the playing field suddenly falls into the retailers' favor again, as they hold both markets once more.

Could it be?

[Penguinisto]

*gasp* - could it be the free market in motion working against the MPAA's money grab? COOL!

Man, I don't know whether I actually want to believe what I'm seeing or not...

Now if only they could put the same pressure on the RIAA...

/P

Apples vs. Oranges: 640x480 movie file != DVD set

[mrfett]

why should these two products be priced equivalently? The retailers are looking for preferential treatment, not equal treatment. Download services are selling gimped products, not full multi-disc DVD collections. the two things are entirely different, and if anyone is being short-changed on price it's the download services. Why buy only the movie when for $2-4 more you can get all the extra content at higher quality?

WTF?

[stealie72]

OK, am I the only one who thinks that $12.99 for a magical digital-only copy isn't that great of a price?

For an extra $2, I get the discs with full-quality DVD video on them, and I can burn them in whatever format I want, and use them on any DVD-equiped TV. Not to mention a handy-dandy carrying case with some nice graphics from the movie on it.

Seriously, if ITMS was selling it for like $6, I could see retailers being pissed, but $12.99? Give me a break.

Target has the advantage

[sheldon]

If I had a choice...

$15 at Target
$13 at iTunes

$1 at the movie rental kiosk

I'm going with the movie rental kiosk, unless I want to keep the movie for a long time so I can watch it many times... I'll go with the DVD at Target. So I don't think Target has much to fear here as far as lost revenue.

I will say, that Apple's DRM is just a whee bit better than DivX, although not by much... Sheesh!

Make sure you deauthorize your computer before you upgrade your RAM, hard disk or other system components. If you do not deauthorize your computer before you upgrade these components, one computer may use multiple authorizations. If you find you have reached 5 authorizations due to system upgrades, you can reset your authorization count by clicking Deauthorize All in the Account Information screen. Note: You may only use this feature once per year. The Deauthorize All button will not appear if you have fewer than 5 authorized computers or if you have used this option within the last 12 months.

Online movies less valuable to the consumer

[interiot]

And online movies are less valuable to the consumer. Consider:

• They don't get the box art
• The video download is almost certainly much more compressed than the DVD version

If there's a difference in value to the consumer, it only makes sense that there would be a (small) difference in price.

Class play

[suv4x4]

Class business play in 6 acts:

1. "we threaten to reduce shelf space for DVD-s" -> they don't know of online offers will decrease DVD sales, but they add few numbers and decide it's plausible, therefore worthy of protection

2. let's say Hollywood proceeds with undercutting them online

3. retailers reduce shelf space: as a result from this, DVD sales decrease. Retailers say: "you see? you're ruining out business"

4. Hollywood increases online prices to match DVD's in fear not to lose from DVD sales

5. People refuse to buy vaporware DRM-ed download for the cost of a DVD and online sales wane

6. Aftergame: retailers are happy they eliminated the competition (online), Hollywood is happy they kept their DVD sales (not that they'll stop bitching about otherwise), customers: screwed.

Re:SOP

[Lumpy]

good luck. Panasonic recently screwed every store owner selling their plasmas. I'm an integrator and sell Panasonic 50 inch and large plasmas to my customers wanting built im goodness in their $3,000,000+ homes, but if they can get that same TV at below my cost online they do raise eyebrows.

We asked panasonic and they told us to pound sand, if I was willing to buy 10,000 set's they would give me a deal.

You are trying to fight against massive volume and you will never win. Granted the dumb consumer will buy the $600.00 lower priced plasma from some e-tailer, spend $350.00 in shipping to get it to him, and if he has any problems we gladly help at the tune of $120.00 an hour because it was not purchased from us, or it's actually a different model shipped to them so it does not fit the hole we made, does not have RS232 for crestron integration, lack discreet IR codes, etc.... so it either get's sent back for antoher $180-300 in shipping or we do a change order to modify for the new device and end up charging for 2 hours of programming, labor and materials.

so in the long run they saved nothing by buying it below my cost elsewhere. But then most consumers are not that bright to begin with. they see a shiney at low-low prices and ignore all the added expenses.

Re:Apples vs. Oranges: 640x480 movie file != DVD s

[FlyByPC]

No,no, no -- that's what NetFlix / Blockbuster are for.
(That, and your trusty DVD+-R...)

Studios Win Again

[mpapet]

The studios controlling the distribution of these films are the big winners again.

Retail DVD costs: Media, replication, packaging, distribution, slotting fees, spoils and other logistics problems, and varying amounts of advertising. Throw in the loss of control of the DVD content. That's your priviledge to make and keep personal copies, freedom to play the movie when and where you want. Don't forget the graft required to get stuff on the shelves of your average big box retailer, loss of control of the distribution channel once it hits the retailer's dock and a million other tiny headaches.

Retail Download: Zero duplication costs, nominal distribution costs, advertising. *Total* control of distribution, ability to control when and where the consumer can play the content. (windows media player 11 has this feature) Beyond that granular control of the rights conferred upon the consumer through DRM.

Consumers are willing and happy to trade their freedom for $2. The studio pocket millions of extra dollars.

For every j@ck@ss that thinks this is the "free market" at work, will they please explain where the innovation is in this model? How is the consumer market for movies -more- competitive as a result? I can't see how consumers benefit in an industry controlled by an oligopoly.

... and the choir shouts Hallelujah!

[FellowConspirator]

Seriously. The $12.99 you pay for the video download thorough iTunes is a rip-off. The video resolution and quality is inferior, you don't get the extras, you don't even get to burn it to a DVD so the kids in slap it in the DVD player in the car/living room. People are paying a little (20% less) because they are getting MUCH less (1.4G of movie versus 18G of movie -- can't play on standard equipment).

I'm not saying that $15 is a fair price for a DVD either. It costs the manufacturer, last I heard, about $2.50 for the DVD and packaging (including the DVD production costs, discounting the original film production cost which is, on average, fully recouped during its theater run).

Heck, if net-neutrality really disappears, the cost of the iTunes download may skyrocket. I can't blame Target and Walmart for trying though. It's all about putting the squeeze on the vendors.

Re:SOP

[jedidiah]

No. Consumers are generally interested getting a percieved bargain at the expense of all else including longterm actual cost (the monthly payment mentality), features & incidental costs like shipping or shipping time.

This is why Detroit and Redmond are still in business and why Walmart does so well.

Re:SOP

[nine-times]

What you're saying makes sense, and I haven't really thought about that. At the same time, these complaints seem unfounded since it's a different distribution method entirely distributing what is in many ways a different product. I can understand why Wallmart and Target wouldn't like it, but at the same time, it seems a little crazy for them to be threatening this way.

The way I figure it, people love TV and movies. They're going to want to see them. The studios love making them and love selling them and love buying them. Now a couple of your middle-men are complaining that they're being undercut, when they're accustomed to being the ones who undercut other middlemen. They're threatening to stop being middlemen. I say, there's a supply and there's a demand, and if they don't want to make the money of being a middleman (which is all they do), then find someone else who does want that job. There are other brick and mortar retailers, other online retailers who will still sell the box, and now these digital retailers. There are cable companies with their video on demand. There are PLENTY of routes to distribute movies. Just go ahead and tell Wallmart to go frack themselves.

Am I underestimating the 800 lbs gorilla? Maybe. But if we're really at the point where one retailer is so dominant that they can bully whole industries into refusing to distribute through competing channels, then I think we have a bigger problem.

There is less money to ship the things

[Tjp($)pjT]

Target and Walmart are buying a different version of the movie. It is in a tangible, unlimited sharing form. iTunes M Store sells an intangible collection of bits that needed no additional packageing per unit, so cost less to distribute. It has usage restrictions. Tell Target and Walmart to start a download service for movies and quit gripping.