Target, Disney exchange threats in skirmish over online movies

[crazy4wdw]

Updated:2006-11-17 19:43:56
US retailer Target, Disney exchange threats in skirmish over online movies
By GARY GENTILE AP

LOS ANGELES (AP) - Discount retailer Target backed off plans to pull in-store promotions of products from Walt Disney after Disney threatened not to ship DVDs of hit movie "Pirates of the Caribbean: Dead Man's Chest," a person familiar with the situation said.

The companies are at odds over The Walt Disney Co.'s decision to sell movies online through Apple Computer Co.'s iTunes store for less than it charges Target and other retailers.

The dispute is part of a feud between a number of major retailers and Hollywood studios over online movie sales.

Target Corp. stores had removed signs promoting the DVD of the Disney-Pixar animated film "Cars" and other Disney products, according to a person familiar with the situation who was not authorized to speak for either company.

The two sides are discussing their differences after resolving the standoff, the person said Friday.

A Disney spokeswoman declined comment. A call to Target for comment was not immediately returned. The situation was reported on the Disney Internet fan site JimHillmedia.com and in the Wall Street Journal.

Studios selling digital copies of films for less than the wholesale price of DVDs rankles retailers, who see Internet distribution of films as a threat to their business and have reminded studios that DVD sales provide the majority of profit for most films.

Studios counter that digital versions of films should be less expensive because they are lower quality and typically do not contain the kinds of extra features included on DVDs.

Last month, Target President Gregg Steinhafel sent a letter to every Hollywood studio warning them about undercutting the wholesale price of DVDs by giving online services a better deal on digital offerings.

"Target cannot be expected simply to accept that risk and continue to do business as usual," Steinhafel wrote.

"Our space, signing, promotional programs and the hundreds of millions of consumers in our stores annually should not be undervalued," he wrote.

Disney so far is the only studio offering films over iTunes, which sets its own price for all titles.

Disney and other studios also sell films through other online services, which allow the studios to set their own prices.

 

[Cricket2]

DVD's are slowly on their way out. Physical media in general is going to be extinct in our lifetime. The sooner places like Target realize it and embrace it, the faster they will find their profit niche in the new era of digital licencing.

 

[KMovies]

I for one would think that downloading a movie would be cheaper than buying a DVD. The DVD has to be shipped to the store, placed in a plastic box, has a fancy cover, extra features, shrink wrapped etc.

So, I would think that Disney would charge less to a company that is going to let someone download the movie than one that is going to sell DVDs.

With that said, you are not getting the extra features when you download the movie - so I wouldn't be rushing to download the movies yet. I'm still in the DVD game ... which I believe most of the country is too.

That may likely change.

And Disney will make out like a bandit. You got rid of the Mermaid VHS, bought the Mermaid DVD, and then will pay to download Mermaid Special Enhanced Version someday. At least the Beta died before Mermaid came to life.

 

[raidermatt]

Target should be figuring out how to profit from the on-line offerings, rather than trying to pretend they don't exist, and won't exist in the future.

"Our space, signing, promotional programs and the hundreds of millions of consumers in our stores annually should not be undervalued," he wrote.

A good point, to be sure. However, he should also keep in mind his stores won't have hundreds of millions of consumers in them if they don't find a way to compete, rather than complain.

 

[Lewisc]

I don't see why online distribution needs a "middle man" retailer. I don't think Target can profit from online offerings.

Target is making a lot of sense. Why should they allocate promotional resources toward market that is on the way out?

Target stores will only have millions of consumers in them if they have products customers want to buy in the store. That may mean de-emphasizing DVD sales if they can't compete with on line offerings.

Target should be figuring out how to profit from the on-line offerings, rather than trying to pretend they don't exist, and won't exist in the future.


A good point, to be sure. However, he should also keep in mind his stores won't have hundreds of millions of consumers in them if they don't find a way to compete, rather than complain.

 

[mickeyfantroy]

From what I understand from a Target friend the main problem he's heard at work is not from downloading as much as their contractual obligaton as to how DVDs are priced. They are ticked that Wal-Mart can undersale them not because WM is getting a cheaper cost, or because WM is using is as a loss leader as much as they worked out a better contract with Disney for they are allowed to sell new release DVDs for. Target has supposedly already pulled all signage in the stores not only for DVDs but ALL Disiney product lines. He said if an agreement is not reached then once Target sales all their Disney merchandise from the stores and distribution centers it will be gone. Not just DVD but no toys, no bed sheets, no candy, no clothes, nothing with any Disney character. I personally think this is going to backfire on Target.

 

[Cricket2]

For us, removal of Disney products combined with Target's existing half-baked return policies would spell the end as far as our $ is concerned. Fighting the consumer's wants is not the way to beat Wal-Mart and their Soviet bloc internment camp style of sales.

 

[raidermatt]

I don't see why online distribution needs a "middle man" retailer. I don't think Target can profit from online offerings.

Isnt' that what iTunes is doing? Disney isn't selling the movies through Disney.com.

Target is making a lot of sense. Why should they allocate promotional resources toward market that is on the way out?

But that isn't Target's beef. They aren't acknowledging the change, they are trying to stop it by promoting other studio titles over Disney's titles. But since they really want those Dead Man's Chest DVDs, they had to reconsider (I did hear they got some Pooh merhandise out of it).

Target stores will only have millions of consumers in them if they have products customers want to buy in the store. That may mean de-emphasizing DVD sales if they can't compete with on line offerings.

But again, its not about de-emphaszing DVD sales, its about trying to keep studios from offering their movies on-line in the first place. They weren't replacing Disney's DVD space with different types of products. They were just moving Disney's DVDs to the back of the DVD section.

But yes, the real issue is that on-line sales are a threat to the brick and mortar retailer. Which is why Target and others have a decision to make. Either find a way to compete in the new business model, or accept the fact that they won't be selling as many movies in the future.

Trying to stop that new model isn't going to work.

 

[Another Voice]

I think Target's issues have more to do with Disney's offerings than Disney selling movies through iPod. How many people are going to watch Pirates of the Caribbean on an iPod's 2 inch screen?

Instead Disney was demanding that in order to get Pirates that they also stock up on the stripped-down DVD of Cars, box office mega flops like Goal! and video pollution like Fox and the Hound, Part 2 as a way to fluff Disney's revenues.

There's a lot more going one behind the scenes than what you read in the press. Disney - and most studios - are trying to force bombs through retail channels while at the same time trying to divert more money from the "hits" back to the studio. The retailers feel they are being taken advantage of. For a long time they had a hand shake deal with the studios: big box stores would use hit DVDs as loss leaders to drive traffic into the stores. The retailers would loose money on the DVDs, while the studios made a bundle, because the stores would make up the difference in other other once the consumer was in the store.

But if the studios don't make the consumer go into the stores, why should the retailers loose money on DVD sales?