Wal-Mart Fights Back Against iTunes and the Movie Industry

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RETAIL-IATION

By TIM ARANGO

September 22, 2006 -- Worried about its massive DVD sales, retail behemoth Wal-Mart has told some of Hollywood's biggest players it will retaliate against them for selling movies on Apple's iTunes.

Last year when Disney announced it would begin offering episodes of the hit shows "Lost" and "Desperate Housewives" on Apple's iTunes, the reaction of the world's largest retailer sent shockwaves through the entertainment industry.

Wal-Mart, worried that offering the shows for viewing on iPods would cut into DVD sales at its stores, sent "cases and cases" of DVDs back to Disney, according to a source familiar with the matter.

Now, following Apple's entrance in to the business of selling full-length films for download, the battle between Hollywood and its largest client is getting uglier, as studio executives say Wal-Mart has overtly threatened to retaliate if they go into business with Apple.

So far, Apple has only inked a deal with one studio - Disney - on whose board Apple boss Steve Jobs sits. But after seeing the success Apple had in creating a legal download business for the music industry, the movie industry would like to come aboard.

"We all want to be in the Apple business," said one high-level executive at a major movie studio. But Apple's pricing - $9.99 to $14.99 - is lower than DVD prices at Wal-Mart.

The studios generally charge Wal-Mart a wholesale price of $17.95 for new DVDs, while Apple is paying Disney a wholesale price of about $14.50 per film, according to a studio source.

The last thing studios want to do before the holiday shopping season is to offend their biggest sales outlet; the studios, collectively, rely on Wal-Mart for some $5 billion of DVD sales in the fourth quarter.

But several weeks ago, in the midst of rumors that Apple was close to announcing a deal with Disney, Wal-Mart's David Porter - the executive responsible for stocking the retailer's shelves with DVDs and CDs and whose influence is so immense in Tinseltown that he's been named to Premiere magazine's annual power list - made the rounds of Hollywood studios.

His message, according to a studio exec involved in the discussions: that there would be "serious ramifications" if the studios hopped in bed with Apple.

"They threatened to hurt us in terms of buying less products," said this person.

The situation between Bentonville and Hollywood has gotten so heated and so high-level that Jobs recently phoned Wal-Mart CEO Lee Scott to ask him to moderate his stance, according to a source.

"What they probably will do is not hurt Disney on new titles, but will buy less of their library titles," said one source.

Library titles, however, are where Wal-Mart makes money from DVDs. The retailer typically slashes the price of new releases below cost, making up for it by selling other products to shoppers.

A Wal-Mart spokeswoman said, "We intend to meet our customer needs whether they choose to purchase movies online or in the store and will continue to work hard with all our partners to do that."

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I fuckin' loathe the NY Post, but it's an interesting scenario. It's not a controversial argument to make to suggest that Wal-Mart strongarms its suppliers when it wants to.

I'm not sure what to think here; for starters, I won't buy a movie off of iTunes for $10-13 for the video quality it is. I don't use my iPod for watching videos, anyway, either. I know that Apple plans on coming out with the iTV next year, which will let you view these movies on your TV (no shit, you say, lookit the product name). I'll wait to see what it looks like before biting; in the meantime, why spend $10-13 for a video when you can own a DVD copy for $5-7 more?

That's, I guess, neither here nor there. What do you think of Wal-Mart trying to dictate the industry for you, instead of letting you, as consumers, purchase what you want from where you want, and in what format you want?
 
I'm not looking forward to digital distribution being the standard.
 
This kind of shit pisses me off - big companies resisting change and technological advancement in the name of money. It's like how I'm sure by now in the year 2006 we have the ability to manufacture cars that run purely on water or electricity or something other than gasoline but the oil companies are too big and too powerful to ever let it happen. Walmart needs to adapt. Get into the downloading business or something. Offer the movies at a discount to what iTunes does. Include a free "backup" with artwork and a case with every download. Do something. Do anything except flex your muscles and say it's bad for us so no. Assholes.
 
I think the prices Apple is charging for movies are way to high. I can walk into Target and buy new releases for $15-$20 while older titles can go from $5-$10. Compared to that, $10-$15 for a movie I can only play on a 2 inch screen seems like a complete rip-off.
 
[quote name='dcfox']I think the prices Apple is charging for movies are way to high. I can walk into Target and buy new releases for $15-$20 while older titles can go from $5-$10. Compared to that, $10-$15 for a movie I can only play on a 2 inch screen seems like a complete rip-off.[/quote]

You can play these on any screen you would like at 480p resolution, but regardless I do agree that the price seems a little high. I'd rather consumers decide that the price is too high though, rather than Wal-mart trying to make it so consumers don't even get that opportunity.
 
[quote name='dcfox']I think the prices Apple is charging for movies are way to high.[/QUOTE]

Totally agree with that. A physical copy can be sold for a bit of money back when you are finished, or better yet bought used to shave even more off the up-front cost.

I can't see myself ever really getting into paying for digital content unless it's a lot less than the physical media.

And basically you don't fuck with Wal-Mart. I'm sure the studios are freaking out on this one. I wonder if Wal-Mart has seen a drop in CD sales since iTunes skyrocketed and decided to not sit back on movies/TV shows? (But doesn't WM.com sell MP3s?)
 
[quote name='wubb']Totally agree with that. A physical copy can be sold for a bit of money back when you are finished, or better yet bought used to shave even more off the up-front cost.

I can't see myself ever really getting into paying for digital content unless it's a lot less than the physical media.

And basically you don't fuck with Wal-Mart. I'm sure the studios are freaking out on this one. I wonder if Wal-Mart has seen a drop in CD sales since iTunes skyrocketed and decided to not sit back on movies/TV shows? (But doesn't WM.com sell MP3s?)[/quote]

Yeah, I'm pretty sure they still sell some form of digital music online, but I'm not sure who's buying it. One thing I do know though, Wal-Mart sells iTunes gift cards, iPods, and a crapload of iPod accessories. I really think Wal-Mart is over-reacting on this one.
 
[quote name='javeryh']This kind of shit pisses me off - big companies resisting change and technological advancement in the name of money. It's like how I'm sure by now in the year 2006 we have the ability to manufacture cars that run purely on water or electricity or something other than gasoline but the oil companies are too big and too powerful to ever let it happen. Walmart needs to adapt. Get into the downloading business or something. Offer the movies at a discount to what iTunes does. Include a free "backup" with artwork and a case with every download. Do something. Do anything except flex your muscles and say it's bad for us so no. Assholes.[/QUOTE]


That has alot to do with the government also. They get so much tax revenues from gas, they will never want to let it go. They can't tax water the way the do gasoline.


[quote name='shipwreck']Yeah, I'm pretty sure they still sell some form of digital music online, but I'm not sure who's buying it. One thing I do know though, Wal-Mart sells iTunes gift cards, iPods, and a crapload of iPod accessories. I really think Wal-Mart is over-reacting on this one.[/QUOTE]


Yeah, what walmart should do is stop selling apple products if they are serious. Its not like there is much profit in them anyway.
 
I think it's a good move by Wal-Mart. They're seeing into the future and trying to nip it in the bud before it becomes a problem to them. Yeah, right not it's expensive to download the movie, not to mention that if you lose the digital movie and the receipt you're pretty much screwed, and the poor picture quality. But all of those can be remedied in the near future, not to mention a possible endless offering of special features (imagine if you could download a movie, then instead of having to re-purchase the movie 6 months later because a new version came out, just downloading for free the stuff you don't have). Of course that last part will never happen because they just love creating 8 versions of one movie.

Anyway, it could become an actual problem soon, so they are taking a firm stance now. I think it's smart on their part. Granted, I would rather have the choice in the matter rather than it being dictated to me. But that doesn't mean I can't appreciate the decision.
 
What are you talking about myke? Surely the invisible hand of the market will find what's best for the consumer....

A new day and a new reason not to shop at wal-mart
 
[quote name='Brak']I'm not looking forward to digital distribution being the standard.[/QUOTE]

Same here, I need a physical copy of whatever I'm paying for.
 
the physical market and digital market can easily co-exist and the physical one will always dominate. It may get a chunk taken out of it, which is what wal-mart is kicking and crying about, but it'll always be ahead.
 
It'd be nice to see studios show some backbone and give Walmart the finger. As long as all the big-wigs sign up with Apple, whether or not they release all their properties onto Apple's service (not sure how that's generally functioning right now as far as new/old content), Walmart can't do a whole lot. Are they going to stop carrying every new release? If so, awesome, people can start shopping elsewhere. And if not, they can shut up.
 
[quote name='GuyWithGun']I think it's a good move by Wal-Mart. They're seeing into the future and trying to nip it in the bud before it becomes a problem to them.[/QUOTE]

Part of what our society embraced in laissez-faire capitalism is that the consumers, not the capitalists, determine what is best for society. It's democratically voting with your wallet. What Wal-Mart is doing is preventing you, I, and everybody else from the ability to make that decision ourselves.

It's not a matter of if you hate digital property or prefer a physical copy of your movie. Wal-Mart could just as easily tell a movie studio "Don't sell your product through Best Buy or we'll no longer carry your products." What's the difference, really? They're telling movie companies to not sell their item through a retailer or else; the format is, in my view, irrelevant.

Given that 20% of ALL commercial transactions in the United States takes place in a Wal-Mart, they carry a lot of weight with their threats.

There was an amazing article in Harper's Magazine this year: luckily it's available online, and it's a helluva read on how WM has harmed not only consumers and society, but large corporations as well. Plus is gave me a new $10 word to use: monopsony.
http://www.harpers.org/BreakingTheChain.html
 
[quote name='mykevermin'] Plus is gave me a new $10 word to use: monopsony.
[/QUOTE]

Which is taught in econ 101. :D


Walmart is kind of a double edged sword. They do some great things and some bad things.
 
[quote name='mykevermin']There was an amazing article in Harper's Magazine this year: luckily it's available online, and it's a helluva read on how WM has harmed not only consumers and society, but large corporations as well. Plus is gave me a new $10 word to use: monopsony.
http://www.harpers.org/BreakingTheChain.html[/quote]
Good article.

Yeah, please note that I'm not condoning the practices of Wal-Mart, just saying that it's good business on their part.

I wonder if they think that some of their actions are to, "protect," the consumer or if they fully realize it's a business tactic. Like the price ceiling they put on some products so the consumer doesn't have to pay more/which would cause them to buy less.
 
What!?!? Wal-Marts not a big, cuddly, teddy-bear of consumer love? But their cheers, smily face clearance signs, and subliminal messaging store layout scheme suggested so much more!
 
Wal-mart doesn't need to worry. As long as Disney movies are on the shelf at 7 in the morning. The pepsi drinking, chain smoking, mothers will be there yelling at you if they're not.

Yes I worked at wal-mart once. And I can't wait until the day that company dies.
 
If anything I doubt that such a service like movies/tv shows on iTunes is really going to make a difference. Most people will hold off for the TV show boxset when it comes out since cost wise it will be a better deal when bought during a good sale. Same with movies. If anything having this available on iTunes is more of Hollywood's way of saying "look now we have movies and shows available legally on a service" to the piracy scene. Wallyworld has little to nothing to worry about.
 
If I were Wal-Mart I'd be more worried about other aspects of their business such as the cleanliness and safety of their stores, customer service, and hiring employees that are generally smarter than a retarded monkey (or Paris Hilton if you need a "human" example).

But no, here they are, bitching about Apple and Hollywood about their new way to distribute movies (lord forbid other companies coming up with new business practices) because it may cut into their bottom line a little bit. Dipshits.
 
[quote name='Graystone']As long as Disney movies are on the shelf at 7 in the morning. The pepsi drinking, chain smoking, mothers will be there yelling at you if they're not.[/QUOTE]

QTF.

You don't realize how many times I've dealt with people like this.....
 
I always find Wal-Mart related issues to be pretty interesting (read The United States of Wal Mart if you get a chance.) Anyway, yes, I hate the fact that Wal Mart does dictate what consumers can buy. It would be nice to see companies give Wal-Mart the finger, but realistically, they can't do that. I hate Wal-Mart, but at the same time, I hate the concept of digital distribution, too. I don't trust Apple and I don't like the idea of paying for a good that's not even a physical product.

Anyway, from a business perspective, Wal-Mart's making a good choice by taking a Luddite stance and trying to prevent digital distribution from spreading and taking their market share, but wow... this is a lose-lose situation for the consumer.
 
[quote name='mykevermin'] What do you think of Wal-Mart trying to dictate the industry for you, instead of letting you, as consumers, purchase what you want from where you want, and in what format you want?[/quote]


And people thought EA was bad...

The funny thing is that DVDs can regularly be found cheaper through various online sites anyway (thank goodness online businesses give the consumer so many options now). I primarily purchase anime anyway and Wal-Mart's selection in that regard is quite limited. Plus, picture quality is desirable to instant downloads with most people anyway.

I couldn't care less about iPods. I have no need for one and don't want one in the future.
 
The only thing I hate about digital distrubution is that it's still too fucking expensive. I'm paying $9.99 - $14.99 per movie on Itunes, according to the article, but I can regularly get all my movies (new and old) for $14.99 and under through the various retailers, on sale and not on sale.

You think that if things would be digitally distrubuted they would pass the savings on to me... I'm not paying the same price for a movie I can just grab a hard copy of.

I have no problem with digital distrubution as long as it's a good price.. if Apple was charging say, $7 for all their movies, you better believe I'd hop on that train.
 
[quote name='Roufuss']The only thing I hate about digital distrubution is that it's still too fucking expensive. I'm paying $9.99 - $14.99 per movie on Itunes, according to the article, but I can regularly get all my movies (new and old) for $14.99 and under through the various retailers, on sale and not on sale.

You think that if things would be digitally distrubuted they would pass the savings on to me... I'm not paying the same price for a movie I can just grab a hard copy of.

I have no problem with digital distrubution as long as it's a good price.. if Apple was charging say, $7 for all their movies, you better believe I'd hop on that train.[/quote]

That would be more reasonable.
 
I hate how Wal-Mart also tries to dictate what content is right for you. I never shop at Wal-Mart or do so very rarely, but I noticed that at Wal Mart they only sell edited cds and sometimes even edited DVDS. Censorship.... bletch.
 
[quote name='mykevermin']There was an amazing article in Harper's Magazine this year: luckily it's available online, and it's a helluva read on how WM has harmed not only consumers and society, but large corporations as well. Plus is gave me a new $10 word to use: monopsony.
http://www.harpers.org/BreakingTheChain.html[/quote]

I can handle Walmart harming consumers and society.

But when they harm big business - they've gone too far!
 
I can understand downloading music (Even though iTunes uses a shitty format and there are more sites than iTunes that has music downloads) But i dont see why you should download a movie when you can get a hard copy for a few more bucks with full quality and special features.
 
I remember hearing from Apple that they had hard time convincing these movie companies to sell it cheaper, but it looks like the movie companies wanna make big bucks. kinda like the recordong companies wanted Apple to raise the $0.99 price to over $1.50 or so.

anyways, if movie companies started offerring them cheaper, then who knows. even with this HD-DVD or Blu-Rays coming out, then i dunno if i can afford those or i can look at iTunes for stuff.
 
Thats really funny...

They're afraid that they'd sell less and their reaction is to get less product to sell period...
 
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