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

In other news...

[LordEd]

Retailers want money, shoppers want deals, and cats want all your base. News at 11:00.

Re:In other news...

[tygerstripes]

Then these web-vendors must be stopped - FOR GREAT JUSTICE!!!

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

[hcob$]

well, with the itunes versions being on DRM lockdown, and dvds being able to be played on any dvd player they (B&M retailers) should market against itunes and the likes by mentioning that fact. Join us in the fight against DRM people! I would pay an extra dollar per DVD if they would help fight them.

Silly me, I thought that DVD's were DRM'd(encrypted). But a fallicous argument never stopped the US Consumer from listening.

Re:Finally, a taste of their own medecine

[drinkypoo]

Silly me, I thought that DVD's were DRM'd(encrypted). But a fallicous argument never stopped the US Consumer from listening.

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

The actual problems with copying DVDs are the ways they deviate from the standard in order to make the DVD unrippable.

Philips actually came down on some people for using the COMPACT DISC logo on CDs mastered some funky way to make them not be rippable (without using a data track, they were unreadable in data drives, but worked fine in audio) and told them they had to unfuck the CD or stop using the logo or get sued. Not sure how it all fell out though. But regardless, the DVD consortium, if it had any integrity which we know it doesn't, would be doing the same thing.

Re:Finally, a taste of their own medecine

[r3m0t]

They stopped using the logo.

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??

[Jonny_eh]

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

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.

Re:Huh??

[nine-times]

And a video with lower picture quality and audio quality than the DVD, with no DVD extras, etc. But you know what? And what's with the threat, anyway? "If you take an action that might possibly hurt our DVD sales business, we'll cut ourselves out of the DVD sales revenue completely!" If I were the movie studio, I'd call this bluff.

Re:Huh??

[shmlco]

Disney said they sold 125,000 movies on iTMS the first week, which works out to be roughly 150,000 GIGABYTES of data transfer. Plus having the servers to process transactions and deliver said content in addition to the TV shows and songs already there.

I'll submit that building and maintaining the infrastructure to deliver that much paid content in a timely and reliable fashion is not cheap.

And that's just the first week...

SOP

[NineNine]

Standard Operating Practice. I own a retail store, and this happens every day. Manufacturers have to be very careful not to undercut their brick-and-mortar retailers, else they'll lose them. I did the same thing just last week. I found one of our manufacturers selling their products at my wholesale cost online. I told them that they need to fix that, or I'll dump the products. As is, I have customers coming in asking me why we're more than the website, and why they should bother shopping at my store if I'm going to rip them off. Manufacturers can never undercut their retailers (or let one retailer grossly undercut another), otherwise they risk losing them. And, without the retailers, they're dead in the water.

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: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.

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.

Uh, sorry...

[Kantara]

But Target and Wal-Mart needs to RTFP. Apple's pricing is as follows:

$9.99 - Library purchase
$12.99 - Pre-release and new releases for the first week
$14.99 - After one week as a new release and before it becomes a library purchase (Take a look at Annapolis - $14.99. It was $12.99 the first week Apple started to sell videos)

So, Apple gets one week where they are $2 cheaper before Target matches and Wal-Mart undercuts their pricing. They are just complaining that they have new competition.

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...)

And the point is?

[frovingslosh]

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.

So for $14.87 you can get 2 already made discs at Walmart, in a nice storage case, with plenty of extra bonus material, that will play on any (region 1) DVD player, or for less than 2 dollars less you can spend your own bandwidth to deliver a copy to you, and provide your own packaging and media, that contains only the movie, is of a much poorer quality, has a DRM infestation that will keep you from using it where you want to use it, and eventually you will not be able to play back on the system you want to play it back on. If you buy the Wal-Mart version you ratain right of first sale and you are free to resell it if you want, or lend it to friends, or even give it away. If you have the downloaded version you can't legally do any of these. And somehow Wal-mart wants to claim that this alternate outlet puts them at a disadvantage? I'm sure they would like to have a complete monopoly of distribution, but any argument that cheaper on-line sales unjustly undercuts them is completely bogus, and if anything it might even improve their sales when the on-line mark realizes what a bad purchase they made. It certainly makes the Wal-mart price for a couple of mass produced and packaged discs look like a great deal in comparison to on-line pricing.

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.

$2??

[misleb]

I'd be more than willing to pay an extra $2 for the convenience of packaging and burning to disc. I mean, I'd probably do it anyway myself if I downloaded it. The blank media itself nearly takes up that $2. I say a $2 difference isn't enough to make the download time, time burning, and media worth it. The brick and mortar stores are actually getting a pretty good deal.

Although I don't find myself buying movies at brick and mortar stores. If I'm really going to buy a movie (pretty rare) I'll just order it from Amazon or something. Usually it is for a gift. I don't see much point in owning movies except for the few really great ones that you might actually watch more than once or twice. But even then, repeat viewing loses its appeal as I get older.

-matthew

... 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.

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.