If you read the part I wrote earlier about WalMarts $275 billion a year in sales, you would see why they could easily afford to take that chance. DVD sales, in total, for all outlets, during the entire year, is about $5 billion. A drop in the bucket for WalMart and other retailers the size of Target and larger. So WalMart sells about $2 billion worth of DVD's a year. Nice, but not critical for a short period.
I did read your post in its entirety. Even though DVD sales account for about 1.8% of WalMart's total sales, it is significant for WalMart because it makes its money on vast volumes of small mark ups and it needs to keep volume high and tight controls on supply in order to maintain its competitive advantage. WalMart makes money because of its control of lots of 1.8% product lines. WalMart could certainly get by with a loss of 1.8% of its sales, but it can not let that happen to its other product lines. That is why WalMart moved to business products with Sam's Club and is experimenting with luxury items, pharmaceuticals and such. It can not squeeze anymore out of its supply chain than it already has. It need new products. The same is happening to Dell. It can only optimize its business model so much, but at some point the increases in efficiency become too costly - the law of diminishing returns.
So what does that mean. It means that you can use that business model to argue the way you do that WalMart could outlast the industry in hopes that it can make a better contract for the future OR you could argue as I do that WalMart can not maintain its business model if entire industries decide to resist it.
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Originally Posted by melgross
WalMart and Target, as well as any other retailer who thinks they will lise out if theis happens, they could be willing to make this threat because the studios have far more to lose.
I'm not sure what words you were attempting to type, but I agree with you that those stores ARE banking on outlasting threats from the studios. My point is that studios don't need to cave in to those threats, unless the stockholders force them to. People will buy DVD's from the internet or where-ever if they aren't at WalMart and Target will be happy to sell DVD's for a dollar more than WalMart did, if WalMart chooses to leave the DVD selling market. WalMart can only influence the market as long as it is participating in the market.
Like unions who strike when they don't get what they want. The members give up some wages now, for increased wages and benefits in the future.
And that works until non-union labor significantly out grows union labor - talk to a union member working at Ford right now. You give a good representation of WalMart's philosophy. I simply am stating that WalMart can be beaten if you refuse to follow its rules.
I did read your post in its entirety. Even though DVD sales account for about 1.8% of WalMart's total sales, it is significant for WalMart because it makes its money on vast volumes of small mark ups and it needs to keep volume high and tight controls on supply in order to maintain its competitive advantage. WalMart makes money because of its control of lots of 1.8% product lines. WalMart could certainly get by with a loss of 1.8% of its sales, but it can not let that happen to its other product lines. That is why WalMart moved to business products with Sam's Club and is experimenting with luxury items, pharmaceuticals and such. It can not squeeze anymore out of its supply chain than it already has. It need new products. The same is happening to Dell. It can only optimize its business model so much, but at some point the increases in efficiency become too costly - the law of diminishing returns.
The concept here is that WalMart is trying to do exactly what you are saying they do?control the supply in their favor. That argues FOR my position, not against it.
If WalMart lets this go by, then they will lose that control. They can afford to lose part of that 1.8% for a short while. The studios can't. DVD's now make up most of the movie industries profits, and sometimes, in the long run, more than half of its sales as well.
This would be deadly for the studios, but almost nothing for WalMart. Even for Target, it would not be more than a minor loss.
If there wasn't the problem of the government interfering, if the studios took them to court, we would have seen more than threats already. But the problem of restraint of trade would seem to be holding them back for now.
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So what does that mean. It means that you can use that business model to argue the way you do that WalMart could outlast the industry in hopes that it can make a better contract for the future OR you could argue as I do that WalMart can not maintain its business model if entire industries decide to resist it.
My argument works for the reasons you give. If WalMart is seen to be caving in to pressure, THEN other suppliers will be more willing to resist, not the other way around.
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I'm not sure what words you were attempting to type, but I agree with you that those stores ARE banking on outlasting threats from the studios. My point is that studios don't need to cave in to those threats, unless the stockholders force them to. People will buy DVD's from the internet or where-ever if they aren't at WalMart and Target will be happy to sell DVD's for a dollar more than WalMart did, if WalMart chooses to leave the DVD selling market. WalMart can only influence the market as long as it is participating in the market.
If WalMart, and others are able to back their threats up with action, then the studios can't resist for long.
Not only will investors become upset, and dump their holdings, which would be a disaster, but the companies would pour red ink, which would make it impossible to negotiate, and produce new features.
They then would be out of business.
They would have to cave, and it seems as if they have already. Otherwise, they wouldn't be waiting for the holiday season to end. There is no guarantee they will go with iTunes for the rates Disney is agreeing to now.
And that works until non-union labor significantly out grows union labor - talk to a union member working at Ford right now. You give a good representation of WalMart's philosophy. I simply am stating that WalMart can be beaten if you refuse to follow its rules.
The union example was just that, an example of negotiation. Other than that, unions are not in the position of WalMart, and neither is Ford.
The only thing that may be in common, is that today, unions are protected by law. The studios are protected, in a different, and not as provable way, by the laws regarding restraint of trade. That's much harder to prove than union busting. The other difference is that WalMart has the right to carry whatever merchandise it wants to. In most states, a company is not allowed to prevent unions from organizing, and some even require ALL workers to belong, if the union wins the right to represent workers.
If WalMart says that it is re-evaluating whether it wants to continue selling DVD's, and cuts its orders down, it can be very hard to prove that they are doing otherwise. Even if they say that they believe that online sales by others may make it unprofitable to carry DVD's unless they get better pricing, that doesn't mean that the studios can prove it to be retaliation, as a business case can be made for it.
If WalMart lets this go by, then they will lose that control. They can afford to lose part of that 1.8% for a short while. The studios can't.
Granted I agree studios do not want to loose any DVD distribution chains. And certainly not their largest. But I do think you've swung the pendulum too far into Wal-marts favor.
The primary reasons Wal-mart sells so many DVD's is because of its ubiquity and convenience. You can go to Wal-mart buy a hat, baby diapers, and a DVD. But its not as though people go to Wal-mart exclusively to buy DVD's.
If Wal-mart stopped selling DVD's altogether. Their would certainly be a short term hit in DVD sales. But the Wal-mart experience is not so unique that people would stop buying DVD's, they would eventually find other places to buy them from. In the long term Wal-mart would loose those sales.
Granted I agree studios do not want to loose any DVD distribution chains. And certainly not their largest. But I do think you've swung the pendulum too far into Wal-marts favor.
I'm just presenting arguments that have already been made.
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The primary reasons Wal-mart sells so many DVD's is because of its ubiquity and convenience. You can go to Wal-mart buy a hat, baby diapers, and a DVD. But its not as though people go to Wal-mart exclusively to buy DVD's.
Generally, they likely do not. It also doesn't mean that they never do either.
Either way, it doesn't matter. In many places there is no other local source for DVD's, and that does matter.
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If Wal-mart stopped selling DVD's altogether. Their would certainly be a short term hit in DVD sales. But the Wal-mart experience is not so unique that people would stop buying DVD's, they would eventually find other places to buy them from. In the long term Wal-mart would loose those sales.
The point is that WalMart, Target, and a few others could easily afford that hit, but the studios cannot.
I was trying to point out that the studios are very small compared to even Target.
While the huge stores could afford to lose money over this, the studios which are much smaller, even though several are themselves owned by much larger companies, would have a big problem.
Remember that the studios are not rolling in profits. They need large infusions of cash in order to be able to buy new projects, and to then produce and market them. If even 20% of their sales are lost for even just a few months, the money will dry up. Without any confidence that it will come back, which investors will give the money to continue operations? Surely not the banks!
This will have far more of an effect than you think. This could close down smaller studios altogether.
And who is to say that even big companies who own studios, such as GE, Sony, and Vivendi, will be willing to prop them up? All of these companies have been talking, some for years now, about divesting themselves of their studios because of the up and down nature of the business as it is. This could kill some.
Independents such as Nu-Line, have no substantial secondary revenue source. They could go belly up in just a few months.
They need large infusions of cash in order to be able to buy new projects, and to then produce and market them. If even 20% of their sales are lost for even just a few months, the money will dry up.
This isn't the total story of how the finance structure works. Studios are paying less and less of their own money to produce movies and television.
Over the past 15 years most of the money paying for the movies you see come from many various sources from all over the world.
These days the studios mostly pay to distribute and market the films.
Someone would see it as an opportunity and sell DVD's in the vacuum.
Who would do that? It takes months to set up distribution and retail deals. By that time, it could all be over.
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You are being way over dramatic Melgross. The fate of billion dollar media empires rests on the whims of Walmart?
I'm not being dramatic at all. If you follow the busines, you would see for yourself. Even if you only read the NYTimes and the WSJ, you would have read dozens of articles about the business, and its problems. Also several articles about this very problem and possibility.
Film companies are very much on the edge. Those that are making profits are doing it sporadically. One or two big films often have to carry a company for the rest of the year. They then depend upon DVD revenue to make up for losses in the film itself. It's one reason why companies started cross distribution deals several years ago. to shield themselves from the total costs.
It's also why they have entered deals with producers and actors, even writers occasionally, to defer payments, such as fees, and salaries, for a percentage of the profits (and sometimes, even the gross), as well as for games, toys, etc. that may result. That way, they don't have to put up the huge salary costs upfront, and move them to a point when returns have reached a certain break-even level, even though it costs more in the long run.
Money has become a problem in the industry, with several big names calling for a lot of "small" films, rather than a few blockbusters that might not pan out.
This could disrupt the flow of monies in the industry.
If you don't believe me, read Variety. They've had some interesting articles this year.
I am in the business. I have friends who work in various capacities in show business.
I do read the NY Time, LA Times, and Variety.
There indeed has been concern about movie theater attendance and slumping ticket revenue. But I haven't read anything as alarmist as what you are talking about.
Studios are being forced to trim the fat and be more fiscally responsible.
Its becoming rare for a studio to foot the entire bill of a movies physical production. When they do its because they feel sure the movie will make a lot of money and they don't want to share the profit with other investors.
Its more common for studios to share a portion of the physical production costs with other investors. Becoming more common for studios to pay none of the costs of physical production. To only acquire the distribution rights.
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All of these companies have been talking, some for years now, about divesting themselves of their studios because of the up and down nature of the business as it is.
Yes that's exactly why General Electric just bought Universal last year.
Pretty much these companies just swap conglomerates. I cannot see anyone of the major studios going out of business anytime soon.
This isn't going to turn out to be another one of those "Anamophic DVDs aren't really anamorphic" type of discussion again is it?
I will note that Walmart only threatened to REDUCE DVD titles. Not eliminate them. That would argue against the doomsday, salt the earth scenario that melgross suggests.
This isn't going to turn out to be another one of those "Anamophic DVDs aren't really anamorphic" type of discussion again is it?
I will note that Walmart only threatened to REDUCE DVD titles. Not eliminate them. That would argue against the doomsday, salt the earth scenario that melgross suggests.
Vinea
I didn't say that they would eliminate them either, just that they would REDUCE them, and possibly SAY that they might eliminate them. Even reduced sales would be a blow to the studios.
It's certainly not a doomsday senario. It would end with all parties coming to some kind of agreement. But the threat would be there.
The point is that the studios couldn't take the chance that the threat would be carried out.
If WalMart lets this go by, then they will lose that control. They can afford to lose part of that 1.8% for a short while.
That is why WalMart is actually in a precarious position for all of its power. Like MS and Dell it needs to maintain its power, because its business model is not based upon a good sustainable business, it is based upon a constantly growing, consuming, controlling business. Their stockholders expect constant expansion and when they don't get it they punish WalMart. MS seems to be a bit insulated from that usually, but we'll see. Dell is now feeling that pain. Apple on the other hand requires some growth, but its business model is to create an extremely loyal and slowly growing market share (at least in pc's). My point is that WalMart is forced to act heavy handed because it can't let any prisoners to leave Stalag 13. So as I said you are giving a good argument for why they are acting like bullies and I'm saying those same economic dynamics are a weakness.
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Originally Posted by melgross
The studios can't. DVD's now make up most of the movie industries profits, and sometimes, in the long run, more than half of its sales as well.
Studios are owned by GE, Disney and other megabusinesses that can outlast WalMart. Sure they don't want to and they are willing to play WalMart's game, but they are not going to let Paramount and Universal and Warner Brothers go out of business!! They need content!! Who else is going to make movies at that level? It's not like people are going to stop wanting to go to or buy movies.
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Originally Posted by melgross
This would be deadly for the studios, but almost nothing for WalMart. Even for Target, it would not be more than a minor loss.
Your main logical flaw here is that you assume Target and WalMart will cooperate and not compete for DVD sales. Even the biggest anti-corporate conspiracy geeks wouldn't believe that. Target would LOVE for WalMart to stop selling DVD's!!
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Originally Posted by melgross
Not only will investors become upset, and dump their holdings, which would be a disaster, but the companies would pour red ink, which would make it impossible to negotiate, and produce new features. They then would be out of business.
So the whole industry goes out of business if WalMart stops selling DVD's ... right. The business model will change. The public will always demand movies and the studios would have to work a little harder and sell DVD's at every Safeway, Albertson's, Costco, Fry's, Best Buy, ..... and they would lose perhaps 5% of their profit but they would be fine. Why? Because of the other flaw in your argument.
You assume that the $5 billion that WalMart sells came from new markets and demand that would dry up with WalMart. Wrong. The $5 billion that Walmart sells represents the $4 billion that were sold before WalMart got into DVD's. Meaning Walmart took marketshare away from other stores and those DVD's would simply go back to those other stores and 20 regional stores could make up one the differences of all of those Walmarts. Again though, that would cost the studios some money because they have to cater to 20 companies rather than 1, but they did that 15 years ago. They would take a financial hit, but it wouldn't be a $5 billion financial hit. I don't know if I explained that clearly enough, but it is true.
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Originally Posted by melgross
They would have to cave, and it seems as if they have already. Otherwise, they wouldn't be waiting for the holiday season to end. There is no guarantee they will go with iTunes for the rates Disney is agreeing to now.
The only reason they are waiting until next year is that is serves the purpose of the studios to keep Apple honest, see if MS can provide some competition and to keep the WalMart gravy train going, even though they don't like to feel dependent. It is like Americans and oil. They don't like the dependency, but they'll put up with it while the going is easy.
I agree the studios are somewhat of a feast and famine business, but the reason is that they are mostly competing with themselves. (Yeah sports and video games also are big factors, but those are outside of the WalMart discussion) If all of the studio's took a temporary 5% hit in profits at the same time, it wouldn't affect the business really. It would just cut everyone's wages and Keanu Reeves' next contract by 5% and everyone would be just fine. A falling tide lowers all boats. It is called a re-adjustment and the stockmarket does it all of the time.
I spoke to a friend of mine last night who works for Paramount Home Entertainment.
I asked him about Walmart and its importance. Of course he said Walmart sells the most DVD's in the US and they are a very important distribution chain.
I asked him if Walmart stopped selling Paramount DVD's would Viacom stock holders cash in their stock and the company go out of business.
He said their would definitely be a loss in DVD sales, but other companies such as Target, Best Buy, Circuit City would gladly take up the slack and sales would eventually stabilize.
He also said Walmart is the largest seller of DVD's in the US. Walmart is not the only or largest DVD retailer in the world. So if Walmart stopped selling DVD's the effect would not be felt across total sales of DVD's.
That is why WalMart is actually in a precarious position for all of its power. Like MS and Dell it needs to maintain its power, because its business model is not based upon a good sustainable business, it is based upon a constantly growing, consuming, controlling business. Their stockholders expect constant expansion and when they don't get it they punish WalMart. MS seems to be a bit insulated from that usually, but we'll see. Dell is now feeling that pain. Apple on the other hand requires some growth, but its business model is to create an extremely loyal and slowly growing market share (at least in pc's). My point is that WalMart is forced to act heavy handed because it can't let any prisoners to leave Stalag 13. So as I said you are giving a good argument for why they are acting like bullies and I'm saying those same economic dynamics are a weakness.
I don't see how you get from one thing to the other. First of all, it's not just WalMart.
But, Dell's model has been stuttering, at best.
Apple isn't depending on slow growth. It's depending on fast growth, which it is getting now. For how long is anyone's guess.
WalMart gets the best prices. It even demands pricing from the Chinese firms, which have complained about it.
If WalMart loses control of this segment in a way that looks bad for them, then it will be a problem.
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Studios are owned by GE, Disney and other megabusinesses that can outlast WalMart. Sure they don't want to and they are willing to play WalMart's game, but they are not going to let Paramount and Universal and Warner Brothers go out of business!! They need content!! Who else is going to make movies at that level? It's not like people are going to stop wanting to go to or buy movies.
Some studios are, but some, including all of the smaller ones, are not.
WalMart is more than twice the size of even GE. I'm not saying that the big studios will go out of business. But the smaller independent studios require outside financing. They could be in danger.
Several of these big companies have been talking about possibly divesting themselves of the studios they control, either by sales, or as spinoffs, though they may not have enough value as spinoffs.
And yes, even GE who bought Universal more recently than the opthers, has been grumbling about it. The management styles don't mesh very well.
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Your main logical flaw here is that you assume Target and WalMart will cooperate and not compete for DVD sales. Even the biggest anti-corporate conspiracy geeks wouldn't believe that. Target would LOVE for WalMart to stop selling DVD's!!
Your logical flaw is that you think they have to get together in this to have the same goals, which they do.
After WalMart made their statements, Target followed. Blockbuster has also been grumbling.
Remember the old saying: "The enemy of my enemy is my friend."
Very often businesses get together on certain problems that concern all of them. After the problem goes away, they break up again.
Don't forget all of the problems of price collusion. According to what you are saying, that would never happen. But, the biggest companies do it if they can get away with it. They are happy to split the market, because it's cheaper in the long run.
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So the whole industry goes out of business if WalMart stops selling DVD's ... right. The business model will change. The public will always demand movies and the studios would have to work a little harder and sell DVD's at every Safeway, Albertson's, Costco, Fry's, Best Buy, ..... and they would lose perhaps 5% of their profit but they would be fine. Why? Because of the other flaw in your argument.
Stick to the arguments that I made, and don't expand them. I never said that the entire industry would go out of business, just some of the independents. But, the larger studios would be hurt as well.
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You assume that the $5 billion that WalMart sells came from new markets and demand that would dry up with WalMart. Wrong. The $5 billion that Walmart sells represents the $4 billion that were sold before WalMart got into DVD's. Meaning Walmart took marketshare away from other stores and those DVD's would simply go back to those other stores and 20 regional stores could make up one the differences of all of those Walmarts. Again though, that would cost the studios some money because they have to cater to 20 companies rather than 1, but they did that 15 years ago. They would take a financial hit, but it wouldn't be a $5 billion financial hit. I don't know if I explained that clearly enough, but it is true.
Now, you're getting your facts wrong as well. WalMart doesn't sell $5 billion worth of DVD's a year. They sell 40% of the total. The total is $5 billion. They sell $2 billion a year. A big difference. If you get that wrong, why should we believe your other figures?
In fact, WalMart has been selling DVD's as long as they have been made.
Companies that have been selling them locally, which gave up on them, couldn't, as I said earlier, simply get back into the business. Thety can't call Sony, and have them send DVD's over. Agreements have to be made with the distributers, which takes time. In the trhee months or so that it takes, the disagreements would lkiely be over, as I also stated.
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The only reason they are waiting until next year is that is serves the purpose of the studios to keep Apple honest, see if MS can provide some competition and to keep the WalMart gravy train going, even though they don't like to feel dependent. It is like Americans and oil. They don't like the dependency, but they'll put up with it while the going is easy.
This is a wholy unsupported statement by you.
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I agree the studios are somewhat of a feast and famine business, but the reason is that they are mostly competing with themselves. (Yeah sports and video games also are big factors, but those are outside of the WalMart discussion) If all of the studio's took a temporary 5% hit in profits at the same time, it wouldn't affect the business really. It would just cut everyone's wages and Keanu Reeves' next contract by 5% and everyone would be just fine. A falling tide lowers all boats. It is called a re-adjustment and the stockmarket does it all of the time.
If it were just a 5% hit in profits, they could do it for a short while, until investors demand that they compromise. But, it could be much more than that.
I spoke to a friend of mine last night who works for Paramount Home Entertainment.
I asked him about Walmart and its importance. Of course he said Walmart sells the most DVD's in the US and they are a very important distribution chain.
I asked him if Walmart stopped selling Paramount DVD's would Viacom stock holders cash in their stock and the company go out of business.
He said their would definitely be a loss in DVD sales, but other companies such as Target, Best Buy, Circuit City would gladly take up the slack and sales would eventually stabilize.
He also said Walmart is the largest seller of DVD's in the US. Walmart is not the only or largest DVD retailer in the world. So if Walmart stopped selling DVD's the effect would not be felt across total sales of DVD's.
Wal-Mart will not be eliminating DVD sales as long as there are consumers for them. They are 100% consumer/price centric. If consumers all of a sudden decide they want Blu-Ray discs, Wal-Mart will stock up and have it available. Things that don't sell at Wal-Mart are immediately given the high hat and booted out the door.
Hollywood has been closely watching Disney's relationship with Wal-Mart in the wake of the deal. When Wal-Mart caught wind of talks between the studios and Apple, it threatened to cut its order of "High School Musical" over the summer.
Disney CEO Bob Iger did the deal with Jobs anyway, and the rest of Hollywood has been watching to see if and when the other shoe drops.
So far, to the surprise of many, it hasn't. And studio sources say the rest of the majors are very close to joining Disney in a deal with Apple but are holding off until the end of the key fourth quarter, when half of all DVD sales occur.
Disney called Walmart on its bluff. Walmart has done nothing because it would not really benefit Walmart to upset the DVD distribution chain.
edit: It would have been easy for Walmart to cut orders of one movie or movies from one studio as an example that is was not bluffing. It would be much more difficult for Walmart to cut orders from all studios.
Studio sources say the rest of the majors are very close to joining Disney in a deal with Apple but are holding off until the end of the key fourth quarter, when half of all DVD sales occur.
And so it looks as though studios will sign up with Apple after Christmas.
Studios are trying to calculate how much longer DVD sales -- 40% of which go through Wal-Mart -- will be a cornerstone of their business. So, too, is Wal-Mart.
Because no one is sure how long the DVD market will be able to sustain itself.
Either way, it doesn't matter. In many places there is no other local source for DVD's, and that does matter.
You must live in a VERY small town. I can buy DVD's just about anyplace I go. Drug Store, Grovery Store, Gas Station, BlockBuster, The Mall...and then there arer the other chain stores and Electronic Stores. DVD's are for sale everywhere, sure most of them are new releases but if I'm looking for something that I can't find then I just go on line to Amazon and its a few clicks away, or I can always order it from BlockBuster which is one of the only national chains that may have more stores than WallMart.
Some studios are, but some, including all of the smaller ones, are not.
Well this is unsubstantiated as well. You haven't shown how much revenue these smaller studios are getting from DVD sales much less shown that they'd "go belly up within a few months" as you assert. New Line Cinema had $2.9 billion worldwide box office receipts from the three LOTR movies alone. Not to mention that New Line, while an "independent" film company is a unit of Time Warner.
The independents are largely defunct anyway. New Line is the last of the Orion, Carolco, Cannon pack and not so independent anyway as part of TW.
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Now, you're getting your facts wrong as well. WalMart doesn't sell $5 billion worth of DVD's a year. They sell 40% of the total. The total is $5 billion. They sell $2 billion a year. A big difference. If you get that wrong, why should we believe your other figures?
This from someone who can state that New Line is in danger of closing if Walmart pulls out of the DVD market without knowing they are a unit of TW? Or that they made $2B revenue off the LOTR box off alone?
Besides, in 2004 movies gnerated $36B in revenues and sellthough of VHS and DVD was $16B.
Hollywood has been closely watching Disney's relationship with Wal-Mart in the wake of the deal. When Wal-Mart caught wind of talks between the studios and Apple, it threatened to cut its order of "High School Musical" over the summer.
Disney CEO Bob Iger did the deal with Jobs anyway, and the rest of Hollywood has been watching to see if and when the other shoe drops.
So far, to the surprise of many, it hasn't. And studio sources say the rest of the majors are very close to joining Disney in a deal with Apple but are holding off until the end of the key fourth quarter, when half of all DVD sales occur.
Disney called Walmart on its bluff. Walmart has done nothing because it would not really benefit Walmart to upset the DVD distribution chain.
edit: It would have been easy for Walmart to cut orders of one movie or movies from one studio as an example that is was not bluffing. It would be much more difficult for Walmart to cut orders from all studios.
Studio sources say the rest of the majors are very close to joining Disney in a deal with Apple but are holding off until the end of the key fourth quarter, when half of all DVD sales occur.
And so it looks as though studios will sign up with Apple after Christmas.
Studios are trying to calculate how much longer DVD sales -- 40% of which go through Wal-Mart -- will be a cornerstone of their business. So, too, is Wal-Mart.
Because no one is sure how long the DVD market will be able to sustain itself.
This is what we are hoping for. It didn't hurt that the concept of restraint of trade was thrown around after WalMart and Target made their threats.
But, they are still waiting until after the holiday shopping season is over. They still arten't taking chances. Once that money comes in, they'll feel better.
It's also been said in those articles that Disney is the one studio that CAN stand up to them, because of the nature of the DVD's they sell, family oriented. People would not be cool with not being able to get the video's for their kids for the holidays, while they might not mind as much about their own.
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If you read the part I wrote earlier about WalMarts $275 billion a year in sales, you would see why they could easily afford to take that chance. DVD sales, in total, for all outlets, during the entire year, is about $5 billion. A drop in the bucket for WalMart and other retailers the size of Target and larger. So WalMart sells about $2 billion worth of DVD's a year. Nice, but not critical for a short period.
I did read your post in its entirety. Even though DVD sales account for about 1.8% of WalMart's total sales, it is significant for WalMart because it makes its money on vast volumes of small mark ups and it needs to keep volume high and tight controls on supply in order to maintain its competitive advantage. WalMart makes money because of its control of lots of 1.8% product lines. WalMart could certainly get by with a loss of 1.8% of its sales, but it can not let that happen to its other product lines. That is why WalMart moved to business products with Sam's Club and is experimenting with luxury items, pharmaceuticals and such. It can not squeeze anymore out of its supply chain than it already has. It need new products. The same is happening to Dell. It can only optimize its business model so much, but at some point the increases in efficiency become too costly - the law of diminishing returns.
So what does that mean. It means that you can use that business model to argue the way you do that WalMart could outlast the industry in hopes that it can make a better contract for the future OR you could argue as I do that WalMart can not maintain its business model if entire industries decide to resist it.
WalMart and Target, as well as any other retailer who thinks they will lise out if theis happens, they could be willing to make this threat because the studios have far more to lose.
I'm not sure what words you were attempting to type, but I agree with you that those stores ARE banking on outlasting threats from the studios. My point is that studios don't need to cave in to those threats, unless the stockholders force them to. People will buy DVD's from the internet or where-ever if they aren't at WalMart and Target will be happy to sell DVD's for a dollar more than WalMart did, if WalMart chooses to leave the DVD selling market. WalMart can only influence the market as long as it is participating in the market.
Like unions who strike when they don't get what they want. The members give up some wages now, for increased wages and benefits in the future.
And that works until non-union labor significantly out grows union labor - talk to a union member working at Ford right now. You give a good representation of WalMart's philosophy. I simply am stating that WalMart can be beaten if you refuse to follow its rules.
I did read your post in its entirety. Even though DVD sales account for about 1.8% of WalMart's total sales, it is significant for WalMart because it makes its money on vast volumes of small mark ups and it needs to keep volume high and tight controls on supply in order to maintain its competitive advantage. WalMart makes money because of its control of lots of 1.8% product lines. WalMart could certainly get by with a loss of 1.8% of its sales, but it can not let that happen to its other product lines. That is why WalMart moved to business products with Sam's Club and is experimenting with luxury items, pharmaceuticals and such. It can not squeeze anymore out of its supply chain than it already has. It need new products. The same is happening to Dell. It can only optimize its business model so much, but at some point the increases in efficiency become too costly - the law of diminishing returns.
The concept here is that WalMart is trying to do exactly what you are saying they do?control the supply in their favor. That argues FOR my position, not against it.
If WalMart lets this go by, then they will lose that control. They can afford to lose part of that 1.8% for a short while. The studios can't. DVD's now make up most of the movie industries profits, and sometimes, in the long run, more than half of its sales as well.
This would be deadly for the studios, but almost nothing for WalMart. Even for Target, it would not be more than a minor loss.
If there wasn't the problem of the government interfering, if the studios took them to court, we would have seen more than threats already. But the problem of restraint of trade would seem to be holding them back for now.
So what does that mean. It means that you can use that business model to argue the way you do that WalMart could outlast the industry in hopes that it can make a better contract for the future OR you could argue as I do that WalMart can not maintain its business model if entire industries decide to resist it.
My argument works for the reasons you give. If WalMart is seen to be caving in to pressure, THEN other suppliers will be more willing to resist, not the other way around.
I'm not sure what words you were attempting to type, but I agree with you that those stores ARE banking on outlasting threats from the studios. My point is that studios don't need to cave in to those threats, unless the stockholders force them to. People will buy DVD's from the internet or where-ever if they aren't at WalMart and Target will be happy to sell DVD's for a dollar more than WalMart did, if WalMart chooses to leave the DVD selling market. WalMart can only influence the market as long as it is participating in the market.
If WalMart, and others are able to back their threats up with action, then the studios can't resist for long.
Not only will investors become upset, and dump their holdings, which would be a disaster, but the companies would pour red ink, which would make it impossible to negotiate, and produce new features.
They then would be out of business.
They would have to cave, and it seems as if they have already. Otherwise, they wouldn't be waiting for the holiday season to end. There is no guarantee they will go with iTunes for the rates Disney is agreeing to now.
And that works until non-union labor significantly out grows union labor - talk to a union member working at Ford right now. You give a good representation of WalMart's philosophy. I simply am stating that WalMart can be beaten if you refuse to follow its rules.
The union example was just that, an example of negotiation. Other than that, unions are not in the position of WalMart, and neither is Ford.
The only thing that may be in common, is that today, unions are protected by law. The studios are protected, in a different, and not as provable way, by the laws regarding restraint of trade. That's much harder to prove than union busting. The other difference is that WalMart has the right to carry whatever merchandise it wants to. In most states, a company is not allowed to prevent unions from organizing, and some even require ALL workers to belong, if the union wins the right to represent workers.
If WalMart says that it is re-evaluating whether it wants to continue selling DVD's, and cuts its orders down, it can be very hard to prove that they are doing otherwise. Even if they say that they believe that online sales by others may make it unprofitable to carry DVD's unless they get better pricing, that doesn't mean that the studios can prove it to be retaliation, as a business case can be made for it.
If WalMart lets this go by, then they will lose that control. They can afford to lose part of that 1.8% for a short while. The studios can't.
Granted I agree studios do not want to loose any DVD distribution chains. And certainly not their largest. But I do think you've swung the pendulum too far into Wal-marts favor.
The primary reasons Wal-mart sells so many DVD's is because of its ubiquity and convenience. You can go to Wal-mart buy a hat, baby diapers, and a DVD. But its not as though people go to Wal-mart exclusively to buy DVD's.
If Wal-mart stopped selling DVD's altogether. Their would certainly be a short term hit in DVD sales. But the Wal-mart experience is not so unique that people would stop buying DVD's, they would eventually find other places to buy them from. In the long term Wal-mart would loose those sales.
Granted I agree studios do not want to loose any DVD distribution chains. And certainly not their largest. But I do think you've swung the pendulum too far into Wal-marts favor.
I'm just presenting arguments that have already been made.
The primary reasons Wal-mart sells so many DVD's is because of its ubiquity and convenience. You can go to Wal-mart buy a hat, baby diapers, and a DVD. But its not as though people go to Wal-mart exclusively to buy DVD's.
Generally, they likely do not. It also doesn't mean that they never do either.
Either way, it doesn't matter. In many places there is no other local source for DVD's, and that does matter.
If Wal-mart stopped selling DVD's altogether. Their would certainly be a short term hit in DVD sales. But the Wal-mart experience is not so unique that people would stop buying DVD's, they would eventually find other places to buy them from. In the long term Wal-mart would loose those sales.
The point is that WalMart, Target, and a few others could easily afford that hit, but the studios cannot.
I was trying to point out that the studios are very small compared to even Target.
While the huge stores could afford to lose money over this, the studios which are much smaller, even though several are themselves owned by much larger companies, would have a big problem.
Remember that the studios are not rolling in profits. They need large infusions of cash in order to be able to buy new projects, and to then produce and market them. If even 20% of their sales are lost for even just a few months, the money will dry up. Without any confidence that it will come back, which investors will give the money to continue operations? Surely not the banks!
This will have far more of an effect than you think. This could close down smaller studios altogether.
And who is to say that even big companies who own studios, such as GE, Sony, and Vivendi, will be willing to prop them up? All of these companies have been talking, some for years now, about divesting themselves of their studios because of the up and down nature of the business as it is. This could kill some.
Independents such as Nu-Line, have no substantial secondary revenue source. They could go belly up in just a few months.
In many places there is no other local source for DVD's, and that does matter.
Someone would see it as an opportunity and sell DVD's in the vacuum.
They could go belly up in just a few months.
You are being way over dramatic Melgross. The fate of billion dollar media empires rests on the whims of Walmart?
They need large infusions of cash in order to be able to buy new projects, and to then produce and market them. If even 20% of their sales are lost for even just a few months, the money will dry up.
This isn't the total story of how the finance structure works. Studios are paying less and less of their own money to produce movies and television.
Over the past 15 years most of the money paying for the movies you see come from many various sources from all over the world.
These days the studios mostly pay to distribute and market the films.
Someone would see it as an opportunity and sell DVD's in the vacuum.
Who would do that? It takes months to set up distribution and retail deals. By that time, it could all be over.
You are being way over dramatic Melgross. The fate of billion dollar media empires rests on the whims of Walmart?
I'm not being dramatic at all. If you follow the busines, you would see for yourself. Even if you only read the NYTimes and the WSJ, you would have read dozens of articles about the business, and its problems. Also several articles about this very problem and possibility.
Film companies are very much on the edge. Those that are making profits are doing it sporadically. One or two big films often have to carry a company for the rest of the year. They then depend upon DVD revenue to make up for losses in the film itself. It's one reason why companies started cross distribution deals several years ago. to shield themselves from the total costs.
It's also why they have entered deals with producers and actors, even writers occasionally, to defer payments, such as fees, and salaries, for a percentage of the profits (and sometimes, even the gross), as well as for games, toys, etc. that may result. That way, they don't have to put up the huge salary costs upfront, and move them to a point when returns have reached a certain break-even level, even though it costs more in the long run.
Money has become a problem in the industry, with several big names calling for a lot of "small" films, rather than a few blockbusters that might not pan out.
This could disrupt the flow of monies in the industry.
If you don't believe me, read Variety. They've had some interesting articles this year.
I do read the NY Time, LA Times, and Variety.
There indeed has been concern about movie theater attendance and slumping ticket revenue. But I haven't read anything as alarmist as what you are talking about.
Studios are being forced to trim the fat and be more fiscally responsible.
Its becoming rare for a studio to foot the entire bill of a movies physical production. When they do its because they feel sure the movie will make a lot of money and they don't want to share the profit with other investors.
Its more common for studios to share a portion of the physical production costs with other investors. Becoming more common for studios to pay none of the costs of physical production. To only acquire the distribution rights.
All of these companies have been talking, some for years now, about divesting themselves of their studios because of the up and down nature of the business as it is.
Yes that's exactly why General Electric just bought Universal last year.
Pretty much these companies just swap conglomerates. I cannot see anyone of the major studios going out of business anytime soon.
I will note that Walmart only threatened to REDUCE DVD titles. Not eliminate them. That would argue against the doomsday, salt the earth scenario that melgross suggests.
Vinea
This isn't going to turn out to be another one of those "Anamophic DVDs aren't really anamorphic" type of discussion again is it?
I will note that Walmart only threatened to REDUCE DVD titles. Not eliminate them. That would argue against the doomsday, salt the earth scenario that melgross suggests.
Vinea
I didn't say that they would eliminate them either, just that they would REDUCE them, and possibly SAY that they might eliminate them. Even reduced sales would be a blow to the studios.
It's certainly not a doomsday senario. It would end with all parties coming to some kind of agreement. But the threat would be there.
The point is that the studios couldn't take the chance that the threat would be carried out.
If WalMart lets this go by, then they will lose that control. They can afford to lose part of that 1.8% for a short while.
That is why WalMart is actually in a precarious position for all of its power. Like MS and Dell it needs to maintain its power, because its business model is not based upon a good sustainable business, it is based upon a constantly growing, consuming, controlling business. Their stockholders expect constant expansion and when they don't get it they punish WalMart. MS seems to be a bit insulated from that usually, but we'll see. Dell is now feeling that pain. Apple on the other hand requires some growth, but its business model is to create an extremely loyal and slowly growing market share (at least in pc's). My point is that WalMart is forced to act heavy handed because it can't let any prisoners to leave Stalag 13. So as I said you are giving a good argument for why they are acting like bullies and I'm saying those same economic dynamics are a weakness.
The studios can't. DVD's now make up most of the movie industries profits, and sometimes, in the long run, more than half of its sales as well.
Studios are owned by GE, Disney and other megabusinesses that can outlast WalMart. Sure they don't want to and they are willing to play WalMart's game, but they are not going to let Paramount and Universal and Warner Brothers go out of business!! They need content!! Who else is going to make movies at that level? It's not like people are going to stop wanting to go to or buy movies.
This would be deadly for the studios, but almost nothing for WalMart. Even for Target, it would not be more than a minor loss.
Your main logical flaw here is that you assume Target and WalMart will cooperate and not compete for DVD sales. Even the biggest anti-corporate conspiracy geeks wouldn't believe that. Target would LOVE for WalMart to stop selling DVD's!!
Not only will investors become upset, and dump their holdings, which would be a disaster, but the companies would pour red ink, which would make it impossible to negotiate, and produce new features. They then would be out of business.
So the whole industry goes out of business if WalMart stops selling DVD's ... right. The business model will change. The public will always demand movies and the studios would have to work a little harder and sell DVD's at every Safeway, Albertson's, Costco, Fry's, Best Buy, ..... and they would lose perhaps 5% of their profit but they would be fine. Why? Because of the other flaw in your argument.
You assume that the $5 billion that WalMart sells came from new markets and demand that would dry up with WalMart. Wrong. The $5 billion that Walmart sells represents the $4 billion that were sold before WalMart got into DVD's. Meaning Walmart took marketshare away from other stores and those DVD's would simply go back to those other stores and 20 regional stores could make up one the differences of all of those Walmarts. Again though, that would cost the studios some money because they have to cater to 20 companies rather than 1, but they did that 15 years ago. They would take a financial hit, but it wouldn't be a $5 billion financial hit. I don't know if I explained that clearly enough, but it is true.
They would have to cave, and it seems as if they have already. Otherwise, they wouldn't be waiting for the holiday season to end. There is no guarantee they will go with iTunes for the rates Disney is agreeing to now.
The only reason they are waiting until next year is that is serves the purpose of the studios to keep Apple honest, see if MS can provide some competition and to keep the WalMart gravy train going, even though they don't like to feel dependent. It is like Americans and oil. They don't like the dependency, but they'll put up with it while the going is easy.
I agree the studios are somewhat of a feast and famine business, but the reason is that they are mostly competing with themselves. (Yeah sports and video games also are big factors, but those are outside of the WalMart discussion) If all of the studio's took a temporary 5% hit in profits at the same time, it wouldn't affect the business really. It would just cut everyone's wages and Keanu Reeves' next contract by 5% and everyone would be just fine. A falling tide lowers all boats. It is called a re-adjustment and the stockmarket does it all of the time.
I asked him about Walmart and its importance. Of course he said Walmart sells the most DVD's in the US and they are a very important distribution chain.
I asked him if Walmart stopped selling Paramount DVD's would Viacom stock holders cash in their stock and the company go out of business.
He said their would definitely be a loss in DVD sales, but other companies such as Target, Best Buy, Circuit City would gladly take up the slack and sales would eventually stabilize.
He also said Walmart is the largest seller of DVD's in the US. Walmart is not the only or largest DVD retailer in the world. So if Walmart stopped selling DVD's the effect would not be felt across total sales of DVD's.
That is why WalMart is actually in a precarious position for all of its power. Like MS and Dell it needs to maintain its power, because its business model is not based upon a good sustainable business, it is based upon a constantly growing, consuming, controlling business. Their stockholders expect constant expansion and when they don't get it they punish WalMart. MS seems to be a bit insulated from that usually, but we'll see. Dell is now feeling that pain. Apple on the other hand requires some growth, but its business model is to create an extremely loyal and slowly growing market share (at least in pc's). My point is that WalMart is forced to act heavy handed because it can't let any prisoners to leave Stalag 13. So as I said you are giving a good argument for why they are acting like bullies and I'm saying those same economic dynamics are a weakness.
I don't see how you get from one thing to the other. First of all, it's not just WalMart.
But, Dell's model has been stuttering, at best.
Apple isn't depending on slow growth. It's depending on fast growth, which it is getting now. For how long is anyone's guess.
WalMart gets the best prices. It even demands pricing from the Chinese firms, which have complained about it.
If WalMart loses control of this segment in a way that looks bad for them, then it will be a problem.
Studios are owned by GE, Disney and other megabusinesses that can outlast WalMart. Sure they don't want to and they are willing to play WalMart's game, but they are not going to let Paramount and Universal and Warner Brothers go out of business!! They need content!! Who else is going to make movies at that level? It's not like people are going to stop wanting to go to or buy movies.
Some studios are, but some, including all of the smaller ones, are not.
WalMart is more than twice the size of even GE. I'm not saying that the big studios will go out of business. But the smaller independent studios require outside financing. They could be in danger.
Several of these big companies have been talking about possibly divesting themselves of the studios they control, either by sales, or as spinoffs, though they may not have enough value as spinoffs.
And yes, even GE who bought Universal more recently than the opthers, has been grumbling about it. The management styles don't mesh very well.
Your main logical flaw here is that you assume Target and WalMart will cooperate and not compete for DVD sales. Even the biggest anti-corporate conspiracy geeks wouldn't believe that. Target would LOVE for WalMart to stop selling DVD's!!
Your logical flaw is that you think they have to get together in this to have the same goals, which they do.
After WalMart made their statements, Target followed. Blockbuster has also been grumbling.
Remember the old saying: "The enemy of my enemy is my friend."
Very often businesses get together on certain problems that concern all of them. After the problem goes away, they break up again.
Don't forget all of the problems of price collusion. According to what you are saying, that would never happen. But, the biggest companies do it if they can get away with it. They are happy to split the market, because it's cheaper in the long run.
So the whole industry goes out of business if WalMart stops selling DVD's ... right. The business model will change. The public will always demand movies and the studios would have to work a little harder and sell DVD's at every Safeway, Albertson's, Costco, Fry's, Best Buy, ..... and they would lose perhaps 5% of their profit but they would be fine. Why? Because of the other flaw in your argument.
Stick to the arguments that I made, and don't expand them. I never said that the entire industry would go out of business, just some of the independents. But, the larger studios would be hurt as well.
You assume that the $5 billion that WalMart sells came from new markets and demand that would dry up with WalMart. Wrong. The $5 billion that Walmart sells represents the $4 billion that were sold before WalMart got into DVD's. Meaning Walmart took marketshare away from other stores and those DVD's would simply go back to those other stores and 20 regional stores could make up one the differences of all of those Walmarts. Again though, that would cost the studios some money because they have to cater to 20 companies rather than 1, but they did that 15 years ago. They would take a financial hit, but it wouldn't be a $5 billion financial hit. I don't know if I explained that clearly enough, but it is true.
Now, you're getting your facts wrong as well. WalMart doesn't sell $5 billion worth of DVD's a year. They sell 40% of the total. The total is $5 billion. They sell $2 billion a year. A big difference. If you get that wrong, why should we believe your other figures?
In fact, WalMart has been selling DVD's as long as they have been made.
Companies that have been selling them locally, which gave up on them, couldn't, as I said earlier, simply get back into the business. Thety can't call Sony, and have them send DVD's over. Agreements have to be made with the distributers, which takes time. In the trhee months or so that it takes, the disagreements would lkiely be over, as I also stated.
The only reason they are waiting until next year is that is serves the purpose of the studios to keep Apple honest, see if MS can provide some competition and to keep the WalMart gravy train going, even though they don't like to feel dependent. It is like Americans and oil. They don't like the dependency, but they'll put up with it while the going is easy.
This is a wholy unsupported statement by you.
I agree the studios are somewhat of a feast and famine business, but the reason is that they are mostly competing with themselves. (Yeah sports and video games also are big factors, but those are outside of the WalMart discussion) If all of the studio's took a temporary 5% hit in profits at the same time, it wouldn't affect the business really. It would just cut everyone's wages and Keanu Reeves' next contract by 5% and everyone would be just fine. A falling tide lowers all boats. It is called a re-adjustment and the stockmarket does it all of the time.
If it were just a 5% hit in profits, they could do it for a short while, until investors demand that they compromise. But, it could be much more than that.
I spoke to a friend of mine last night who works for Paramount Home Entertainment.
I asked him about Walmart and its importance. Of course he said Walmart sells the most DVD's in the US and they are a very important distribution chain.
I asked him if Walmart stopped selling Paramount DVD's would Viacom stock holders cash in their stock and the company go out of business.
He said their would definitely be a loss in DVD sales, but other companies such as Target, Best Buy, Circuit City would gladly take up the slack and sales would eventually stabilize.
He also said Walmart is the largest seller of DVD's in the US. Walmart is not the only or largest DVD retailer in the world. So if Walmart stopped selling DVD's the effect would not be felt across total sales of DVD's.
Wal-Mart will not be eliminating DVD sales as long as there are consumers for them. They are 100% consumer/price centric. If consumers all of a sudden decide they want Blu-Ray discs, Wal-Mart will stock up and have it available. Things that don't sell at Wal-Mart are immediately given the high hat and booted out the door.
Hollywood has been closely watching Disney's relationship with Wal-Mart in the wake of the deal. When Wal-Mart caught wind of talks between the studios and Apple, it threatened to cut its order of "High School Musical" over the summer.
Disney CEO Bob Iger did the deal with Jobs anyway, and the rest of Hollywood has been watching to see if and when the other shoe drops.
So far, to the surprise of many, it hasn't. And studio sources say the rest of the majors are very close to joining Disney in a deal with Apple but are holding off until the end of the key fourth quarter, when half of all DVD sales occur.
Disney called Walmart on its bluff. Walmart has done nothing because it would not really benefit Walmart to upset the DVD distribution chain.
edit: It would have been easy for Walmart to cut orders of one movie or movies from one studio as an example that is was not bluffing. It would be much more difficult for Walmart to cut orders from all studios.
Studio sources say the rest of the majors are very close to joining Disney in a deal with Apple but are holding off until the end of the key fourth quarter, when half of all DVD sales occur.
And so it looks as though studios will sign up with Apple after Christmas.
Studios are trying to calculate how much longer DVD sales -- 40% of which go through Wal-Mart -- will be a cornerstone of their business. So, too, is Wal-Mart.
Because no one is sure how long the DVD market will be able to sustain itself.
Either way, it doesn't matter. In many places there is no other local source for DVD's, and that does matter.
You must live in a VERY small town. I can buy DVD's just about anyplace I go. Drug Store, Grovery Store, Gas Station, BlockBuster, The Mall...and then there arer the other chain stores and Electronic Stores. DVD's are for sale everywhere, sure most of them are new releases but if I'm looking for something that I can't find then I just go on line to Amazon and its a few clicks away, or I can always order it from BlockBuster which is one of the only national chains that may have more stores than WallMart.
Some studios are, but some, including all of the smaller ones, are not.
Well this is unsubstantiated as well. You haven't shown how much revenue these smaller studios are getting from DVD sales much less shown that they'd "go belly up within a few months" as you assert. New Line Cinema had $2.9 billion worldwide box office receipts from the three LOTR movies alone. Not to mention that New Line, while an "independent" film company is a unit of Time Warner.
The independents are largely defunct anyway. New Line is the last of the Orion, Carolco, Cannon pack and not so independent anyway as part of TW.
Now, you're getting your facts wrong as well. WalMart doesn't sell $5 billion worth of DVD's a year. They sell 40% of the total. The total is $5 billion. They sell $2 billion a year. A big difference. If you get that wrong, why should we believe your other figures?
This from someone who can state that New Line is in danger of closing if Walmart pulls out of the DVD market without knowing they are a unit of TW? Or that they made $2B revenue off the LOTR box off alone?
Besides, in 2004 movies gnerated $36B in revenues and sellthough of VHS and DVD was $16B.
http://www.marketresearch.com/produc...id=1351519&g=1
And DVD sales revenues were reported to be $16.3B in 2005.
http://www.usatoday.com/tech/news/20...-dvd-ces_x.htm
Who's got what facts wrong? Why should we believe your other figures either?
Vinea
ObApple: New Line's Snakes on a Plane had an Apple product placement where the Apple logo is clearly seen across the screen from a laptop.
From an article in Variety.
Hollywood has been closely watching Disney's relationship with Wal-Mart in the wake of the deal. When Wal-Mart caught wind of talks between the studios and Apple, it threatened to cut its order of "High School Musical" over the summer.
Disney CEO Bob Iger did the deal with Jobs anyway, and the rest of Hollywood has been watching to see if and when the other shoe drops.
So far, to the surprise of many, it hasn't. And studio sources say the rest of the majors are very close to joining Disney in a deal with Apple but are holding off until the end of the key fourth quarter, when half of all DVD sales occur.
Disney called Walmart on its bluff. Walmart has done nothing because it would not really benefit Walmart to upset the DVD distribution chain.
edit: It would have been easy for Walmart to cut orders of one movie or movies from one studio as an example that is was not bluffing. It would be much more difficult for Walmart to cut orders from all studios.
Studio sources say the rest of the majors are very close to joining Disney in a deal with Apple but are holding off until the end of the key fourth quarter, when half of all DVD sales occur.
And so it looks as though studios will sign up with Apple after Christmas.
Studios are trying to calculate how much longer DVD sales -- 40% of which go through Wal-Mart -- will be a cornerstone of their business. So, too, is Wal-Mart.
Because no one is sure how long the DVD market will be able to sustain itself.
This is what we are hoping for. It didn't hurt that the concept of restraint of trade was thrown around after WalMart and Target made their threats.
But, they are still waiting until after the holiday shopping season is over. They still arten't taking chances. Once that money comes in, they'll feel better.
It's also been said in those articles that Disney is the one studio that CAN stand up to them, because of the nature of the DVD's they sell, family oriented. People would not be cool with not being able to get the video's for their kids for the holidays, while they might not mind as much about their own.