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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."
Retailers want money, shoppers want deals, and cats want all your base. News at 11:00.
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.
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.
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.
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.
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:
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.
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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...
Quo usque tandem abutere, Nimbus, patientia nostra?
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?
And online movies are less valuable to the consumer. Consider:
If there's a difference in value to the consumer, it only makes sense that there would be a (small) difference in price.
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.
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.
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.
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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.
http://www.maxineudall.com/2010/02/should-economists-be-sued-for-malpractice.html