Target warns studios over digital movie pricing
Target has sent a sharply worded letter to movie studios expressing concern that new movie download services like Apple Computer's iTunes are getting better deals from studios on digital copies of movies than retailer gets on DVDs, according to the Wall Street Journal.
In the letter (subscription required), Target President Gregg Steinhafel said that the retailer had become aware that "some movie studios have made new-release movies available to download service providers at lower cost" than DVDs, allowing the downloaded movies to be sold to the public at lower prices.
Steinhafel said the retailer, which accounts for about 15 percent of the big studios' DVD sales in the U.S., did not object to competition but wanted "a level playing field." He went on to say that if Target didn't receive what it considers to be equitable pricing from the studios it would reconsider its investment in the DVD business, suggesting the retailer might cut back on shelf space, promotional programs, signage and other aspects of marketing discs.
The letter followed similar complaints from Wal-Mart, which in August expressed its own share of concerns about Apple's iTunes movie initiative and demanded studios offer it the same pricing granted to Apple.
However, the Journal reports that Wal-Mart has since softened its stance after Apple chief executive Steve Jobs complained in a telephone call to Wal-Mart chief executive Lee Scott about what he considered to be Wal-Mart's anticompetitive behavior. The retailer presently commands around 40 percent of DVD sales in the U.S.
"Fearful of possible legal ramifications, Wal-Mart executives called studio executives and told them Wal-Mart recognized the studios could pursue whatever sales channels they wished, these people say," the report states.
Citing people familiar with the ongoing movie pricing battle, the Journal also reported that studios are eager to put off any escalation of the pricing battle until after the important holiday sales season for DVDs.
"People familiar with the situation say that Apple, too, believes it probably will have to wait until after the holiday season to bring other studios behind Disney into the iTunes fold."
Retailers like Target and Wal-Mart typically pay $17 or $18 wholesale for new-release DVDs. But under Apple's recent deal with Disney, electronic copies of new Disney movies cost consumers as little as $12.99 if preordered or purchased in the first week of release, or $14.99 after the first week of release.
"People familiar with the matter say Apple pays Disney a wholesale price of about $14.50 per movie," the Journal said.
In the letter (subscription required), Target President Gregg Steinhafel said that the retailer had become aware that "some movie studios have made new-release movies available to download service providers at lower cost" than DVDs, allowing the downloaded movies to be sold to the public at lower prices.
Steinhafel said the retailer, which accounts for about 15 percent of the big studios' DVD sales in the U.S., did not object to competition but wanted "a level playing field." He went on to say that if Target didn't receive what it considers to be equitable pricing from the studios it would reconsider its investment in the DVD business, suggesting the retailer might cut back on shelf space, promotional programs, signage and other aspects of marketing discs.
The letter followed similar complaints from Wal-Mart, which in August expressed its own share of concerns about Apple's iTunes movie initiative and demanded studios offer it the same pricing granted to Apple.
However, the Journal reports that Wal-Mart has since softened its stance after Apple chief executive Steve Jobs complained in a telephone call to Wal-Mart chief executive Lee Scott about what he considered to be Wal-Mart's anticompetitive behavior. The retailer presently commands around 40 percent of DVD sales in the U.S.
"Fearful of possible legal ramifications, Wal-Mart executives called studio executives and told them Wal-Mart recognized the studios could pursue whatever sales channels they wished, these people say," the report states.
Citing people familiar with the ongoing movie pricing battle, the Journal also reported that studios are eager to put off any escalation of the pricing battle until after the important holiday sales season for DVDs.
"People familiar with the situation say that Apple, too, believes it probably will have to wait until after the holiday season to bring other studios behind Disney into the iTunes fold."
Retailers like Target and Wal-Mart typically pay $17 or $18 wholesale for new-release DVDs. But under Apple's recent deal with Disney, electronic copies of new Disney movies cost consumers as little as $12.99 if preordered or purchased in the first week of release, or $14.99 after the first week of release.
"People familiar with the matter say Apple pays Disney a wholesale price of about $14.50 per movie," the Journal said.
Comments
Speaking of which, i think it would be nice, if apple offered 2 different picuture qualities for different prices. People with big tv's or displays and/or faster connections might want the full DVD quality, while those with slower connections or viewing on a smaller notebook or iPod could use the lower quality...
This is so lame. Obviously they should pay a lower wholesale price, given the huge savings, on physical media, packaging, shipping, etc.
Agreed 100%. Obviously the retailers don't recognize this and it's just greed they're after.
In the letter (subscription required), Target President Gregg Steinhafel said that the retailer had become aware that "some movie studios have made new-release movies available to download service providers at lower cost" than DVDs, allowing the downloaded movies to be sold to the public at lower prices.
Duh, turkey. If you think they are the same product, then you are delusionary. I don't really think he believes what he wrote. If he thinks he's got some bargaining chips, I wonder if that would drive the studios to iTunes even quicker because the margins should be better if the stated wholesale price is right.
Still, $14.50 a movie for royalties is high for a $14.99 final price.
Duh, turkey. If you think they are the same product, then you are delusionary. I almost don't believe he believes what he wrote.
Still, $14.50 a movie for royalties is high for a $14.99 final price.
Especially since they're selling a lot of them for $12.99.
Boycott Target anyone? I say we circle a petition.
Boycott Target anyone? I say we circle a petition.
I really don't think boycotts work in general.
Even if they did work, I wouldn't participate. In terms of job security, buffoons at the top are a lot more isolated and protected than the people that actually have to work for the chain, it would hurt the wrong people. I really like the store, there's just the question of a buffoon at the top that needs to be removed.
This is so lame. Obviously they should pay a lower wholesale price, given the huge savings, on physical media, packaging, shipping, etc (plus the fact that they're getting a product of MUCH lower quality and value). I hope retail stores will just recognize that they need to move with technology rather than against it, so this doesn't have to come down to a bunch of expensive lawsuits.
Actually, the movie downloads are not that far off of dvd quality. A widescreen dvd is 720x304. Apple is selling full screen version with a resolution of 640x480. I doubt you could tell much difference in the quality when played on a standard TV.
Glor
I really don't think boycotts work in general.
Even if they did work, I wouldn't participate. In terms of job security, buffoons at the top are a lot more isolated and protected than the people that actually have to work for the chain, it would hurt the wrong people. I really like the store, there's just the question of a buffoon at the top that needs to be removed.
Perhaps just a strongly worded petition then.
Actually, the movie downloads are not that far off of dvd quality. A widescreen dvd is 720x304. Apple is selling full screen version with a resolution of 640x480. I doubt you could tell much difference in the quality when played on a standard TV.
Apple is selling full screen versions? Even a kid's movie, The Little Mermaid, is listed as widescreen. Before anyone gets on me with the kid's designation, I do own said movie from the original (1998?) DVD release, and don't have or care for children. I really don't think widescreen and pan and scan are adequately comparable because it is inherently a trade-off.
I won't argue that the apparent quality isn't close to DVD if you watch it on a standard TV. I actually agree that both would probably look the or very close on standard TV sets, because most standard TV sets are pretty bad. As people upgrade, then the difference is going to be a lot more apparent on a widescreen set, HD set or a computer.
The Targets/Walmarts see this and know that when that happnes their dvd sales will shrink faster than thier cd sales.
I think CD sales is a different issue because the CD sales model now requires you buy the entire CD to get the tracks that you want. When there are acceptable alternate options to buy tracks a la carte, then the game changes. For movies, there is no a la carte model, you buy the entire movie either way, not your favorite segments.
Actually, the movie downloads are not that far off of dvd quality. A widescreen dvd is 720x304. Apple is selling full screen version with a resolution of 640x480. I doubt you could tell much difference in the quality when played on a standard TV.
Glor
From what I have heard, at least some of the movies are not full screen versions. They are 640 wide, and less than 480 tall (to keep the wide screen aspect ratio)
Boycott Target anyone? I say we circle a petition.
C'mon, guys, what do you expect? Target is a corporation and can't be criticized for trying to make a few more bucks. At least his letter made strategic sense. If he can convince studios that his claim is valid, good for him... and good for all of us! That means WE can get DVDs for cheaper. Just because it competes with Apple doesn't automatically make it bad. That's one thing the really bugs me about these forums. Apple isn't always the savior of anything and everything. Cheap DVDs are cheap DVDs. Who cares where they come from?
This is aside from the fact that if I were to boycott Target, I'd also have to boycott groceries and toiletries for cheap. I'm not exactly loaded either so Kowalski's or Byerly's (local premium grocers) are out of the question... and I don't think you want to see me go without deodorant
Boycott Blind Apple Patriots, anyone?
-Clive
Boycott Blind Apple Patriots, anyone?
-Clive
I hope you're not insinuating that I am such (though I'm not sure that refusing to buy or sell Apple Patriots really means much, since there is much of a market for them). My comment was facetious in part, and I only meant to imply that I disagreed with what they were doing. Cheap DVD's are cheap DVD's, but they don't serve me, since I only watch most movies once or twice. For the same reason, I hate Apple's solution--I subscribe to Vongo until someone comes out with movie rental downloads for Mac.
However, I think he's being an ignorant jerk, whether his actions end up helping consumers get cheaper DVD's or not. I think it would help consumers a lot more to be able to cut out the costs of things they may not care about (a lot of people would rather not pay for packaging, physical media, or shipping).
If he can convince studios that his claim is valid, good for him... and good for all of us! That means WE can get DVDs for cheaper. Just because it competes with Apple doesn't automatically make it bad. That's one thing the really bugs me about these forums. Apple isn't always the savior of anything and everything. Cheap DVDs are cheap DVDs. Who cares where they come from?
True.
However, Target is trying to sell a different product. They sell commercial DVDs that have gone too far. To me, all those special/complete/exclusive/collector's/ultimate editions are just too much. Like those 32oz soft drinks. Yeah, they are bigger but you don't need all that.
How about DVDs with just the movie, widescreen and fullscreen, with captions and language tracks? No extra feature crap that you only watch once, if at all! No more extraware. That's a way to reduce the price. And those DVD boxes... they are huge.
Actually, the movie downloads are not that far off of dvd quality. A widescreen dvd is 720x304. Apple is selling full screen version with a resolution of 640x480. I doubt you could tell much difference in the quality when played on a standard TV.
Glor
Um, no.
For NTSC, anamorphic DVDs are stored as 720x480 pixels. However, the information in the pixels is not "square", it has been "squashed". To get the picture looking right, you have to stretch it out horizontally and display it at 852x480 with square pixels.
iTunes movies are delivered as 640x360. They have worse sound (Dolby Pro Logic Vs. Dolby Digital and/or DTS) and the comparative level of compression is up for debate (DVDs have a higher bit-rate but use MPEG-2 rather than MPEG-4 AVC)
C'mon, guys, what do you expect? Target is a corporation and can't be criticized for trying to make a few more bucks. At least his letter made strategic sense. If he can convince studios that his claim is valid, good for him... and good for all of us! That means WE can get DVDs for cheaper. Just because it competes with Apple doesn't automatically make it bad. That's one thing the really bugs me about these forums. Apple isn't always the savior of anything and everything. Cheap DVDs are cheap DVDs. Who cares where they come from?
It is interesting how you assume that if Target are persuasive*, the likely outcome is that DVDs get cheaper. What about the downloads getting more expensive and DVDs staying the same price?
* And that's one big assumption. Who is this "Gregg Steinhafel" moron anyway? How did he get to be president of a huge company like Target? To re-iterate what's already been said, what about the fact DVDs are higher quality? What about the cost of the media, packaging and shipping? It would be interesting to see the actual letter. Part of the article implies that Target appreciates these facts but believe the delta is too high ("He went on to say that if Target didn't receive what it considers to be equitable pricing"; "equitable" doesn't mean "equal"), I wonder what they think the delta should be?