New York Post: RETAIL-IATION

[Jason Eaton]

<div class='os_post_top_link'><a href='http://64.233.161.104/search?q=cache:S13g7snnIkIJ:www.nypost.com/business/retail_iation_business_tim_arango.htm' target='_blank'>http://64.233.161.104/search?q=cache:S13g7snnIkIJ:www.nypost.com/business/retail_iation_business_tim_arango.htm</a><br /><br /></div><i>"WAL-MART WARNS STUDIOS OVER DVD DOWNLOADS. 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."</i><br /><br /> <img src="http://www.digitalmediathoughts.com/images/walmart_apple.jpg" /><br /><br />It would seem that Wal-Mart has a bone to pick with Apple and their download service these days. My first thoughts after reading this immediately jumped to Anti-trust, Department of Justice, and Monopoly but is this reaction from Wal-Mart just big business? Wal-Mart isn’t the sole distributor of DVD sales so they aren’t a monopoly as popularly defined but what makes me upset is that Wal-Mart has a lot of leverage and they can change the options we have as consumers. Loss of choice is always bad in my book.

[Jason Dunn]

If the result of this is that DVD prices get pushed even lower, than I'm all for it. If the result is that certain DVDs won't be on the shelves at Wal-Mart, well, that's less of a good thing. Though I should point out that I hate DVD shopping at Wal-Mart because it's bloody impossible to find anything, and the staff is clueless. I prefer buying from Amazon.ca.

[Felix Torres]

No question this is just big business as usual stuff...
...but...
...both sides are actually skating dangerously close to (potentially) legally actionable behavior; WalMart of restraint on trade issues, Disney/Apple on anti-trust/conspiracy grounds.

Two points that make this a legal battle in the making is that:
1- WalMart alone accounts for 40% of DVD sales in the country.
2- Apple's jobs is the largest stockholder at Disney, which is the sole studio supplying movies to iTunes, which in effect makes iTunes a Disney instrument. Iger didn't help his cause much last week by bragging publicly about how much money they're making off iTune video, either.

Add-in that WalMart is an Apple competitor in the online music distribution business and has apparently been looking to get into online video distribution, and that Disney has been dabbling in proprietary video distribution techniques that bypass retail channels and the level of friction goes up dramatically.

WalMart's business model relies on razor thin profit margins that are only sustainable at very high volumes so they are most vulnerable to channel conflict and likely could make a case in court for dropping Disney content, en-masse, as a reasonable response to competition by a supplier.

At some point, these vertically-organized outfits are going to have to decide how vertical they want to be, cause if there is one phrase sure to elicit bad blood and lawsuits in the retail business, it is "channel conflicts". Those things rarely end well, especially in the high-tech/computing arenas.

[ploeg]

Link doesn't work. Here's the Google cache:

//64.233.161.104/search?q=cache:S13g7snnIkIJ:www.nypost.com/business/retail_iation_business_tim_arango.htm

I'm very sceptical of this report. Talk about cutting off your nose to spite your face. That sort of behavor may work with Rubbermaid, where you can easily find an alternate supplier whose product is about as good, but it's sure not going to cut it with Disney. If Walmart puts Disney movies into a back room or artificially reduces the selection of Disney movies that they stock, Walmart simply starts selling fewer movies, and people start getting used to going somewhere else to get the titles they want. If Walmart were smart (which they are), it's more likely that they will stop promoting iPod and start pushing alternatives. It's more likely, but I don't see that happening either.

If this report has any veracity at all, it's probable that Walmart is simply trying to gain negotiating leverage with the studios and with Apple. Walmart sure isn't going to stop movie downloads, but Walmart can still get a piece of the action. I think it likely that Walmart wants to implement movie kiosks as Cringely suggests, which would instantly increase selection and decrease the amount of valuable floorspace dedicated to movie sales. If Walmart gets a kiosk that can burn encrypted DVDs on the spot, or download DRMed movies to a variety of digital devices, it would have the best of all worlds for Walmart.

[ploeg]

More info:

http://arstechnica.com/news.ars/post/20060929-7869.html

The executive summary is that it's all a shakedown. Things probably won't stay the way they are for long.

[Vincent Ferrari]

The rumor dujour seems to be that Steve Jobs and Sam Walton wanna get into bed with each other on this one, which I think would be a great move for both companies. Wal-Mart gets to go in on an existing and successful digital media outlet while Apple gets a bump in what's available in their catalog.

A win win.

That is, unless you're some smelly hippie toting around an iBook G3 and hate Wal-Mart for oppressing poor people in which case you'll think Steve has sold his soul to Satan... :silly:

[Jason Dunn]

That is, unless you're some smelly hippie toting around an iBook G3 and hate Wal-Mart for oppressing poor people in which case you'll think Steve has sold his soul to Satan... :silly:

Well, wait a second, I thought that was Apple's entire target market and installed user base. :lol:

[Vincent Ferrari]

Somehow I just knew that it would be you to make a remark like that ;-)

[Jason Eaton]

No... no... no... I thought it was Steve Jobs that was Satan and we sold our souls to afford the iPods and the Mac Pro Quad Xeon 64-bit workstation. I am confused. :wink:

[Felix Torres]

No... no... no... I thought it was Steve Jobs that was Satan and we sold our souls to afford the iPods and the Mac Pro Quad Xeon 64-bit workstation. I am confused. :wink:

Satan multi-tasks his many avatars, so he is *both*. Plus, Microsoft, the Dodgers (or giAnts, depending on where you live), George Steinbrenner, Rupert Murdock, the liberal media, etc etc.
Massively multi-core with tons of Flash RAM, he gets around; if there is something you don't like, look closely and you will surely see him there. :twisted:

Or not.

Human greed, hatred, and stupidity (especially the latter) suffice as explanation for the evil humans do. :wink:

[xycury]

Walmart has the weight but it's shockwaves will hurt more than just Apple.


WalMart's business model relies on razor thin profit margins that are only sustainable at very high volumes so they are most vulnerable to channel conflict and likely could make a case in court for dropping Disney content, en-masse, as a reasonable response to competition by a supplier.

Just wanted to note that this only applies to certain products.

As a supplier to Walmart for well over decades now, our GM for walmart must be around 55-60 %. that's not a thin profit at all.

We have a 10 dollar item that we buy for 8 and Walmart turns around and puts it on the shelves for 20.

I think with the music/movie/gaming industry this is harder, and possibly the food also but with everything else.... it's not thin at all.

Of course most pricing is usually a trade secret, but I know we're not the exception.