Apple in Talks with Wal-Mart over Movies

Alex, Variety.com writes "If you can't beat 'em ... Apple and Wal-Mart are in discussions over an alliance that could allow the giant retailer to profit from iTunes video downloads. Apple would then gain access to titles from every major studio." From the article: "A deal could take the form of a digital download 'coupon' that would allow consumers to buy movies, TV shows or music on iTunes with Apple paying the retail giant a percentage of the proceeds, one industry insider said ... 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."

Not sure this means what I think it means

[joshetc]

But if it does, it would be nice to be able to download a movie then pick it up in the store at a later time for only slightly more than the cost of the DVD. Instead of spending $10 for the download and another $20 for the dvd you could spend something like $22 for both in a "package"

Is this premature?

[dschuetz]

I'm certainly not a Marketing Genius, but it seems to me that if the iTunes store really did sell $1,000,000 worth of movies in the first week, then maybe other studios will realize that pissing off Wal-Mart isn't such a big deal after all.

If I were in Apple's place, I think I'd wait a while before giving in to any major retailer. On the other hand, I don't know how gift cards sold at retailers work -- if everyone else who sells an iTunes gift card gets some cut off the top of the cost of the card, then I don't see any issue letting Wal-Mart play in that game, too (which, according to the article, they don't at present).

Didn't a lot of studios initially balk at the idea of TV over iTunes, fearing it'd hurt DVD sales? Somehow I think that movies would go the same way, with initial reluctance, phenomenal sales of the initial Disney titles, growing acceptance, and finally becoming just another standard sales channel.

cringley

[raffe]

Just as the good old cringley [pbs.org] said at September 14:
The success of Apple's movie download business right now depends mainly on not alienating Wal-Mart.
So for the moment Apple tells Wal-Mart that movies sold through the iTunes Store won't be a threat because of their lower than DVD
resolution. When that fails, Apple will point out that HD-DVD and Blu-ray are coming and Wal-Mart should stop worrying. But
eventually Apple will succumb to its need to sell yet more iPods and will point out that its little gizmo is a fine substitute
for an optical disc. Take your iPod to Target and fill it with movies. Or, better still, buy an iPod at Target and THEN fill it
with movies. Remember that in the end this is all about selling more razors, not more blades, so movie sales don't really matter much to Apple as long as iPods are flying off the shelves.

2 Things

[Foolicious]

First of all, just let me buy something online via a download without any digital coupons or anything like that. A novel concept would be that I would go to a website, pick a movie and download it. It's pretty complicated, granted, but I think it could be implemented. But that's neither here nor there...

Secondly, and completely unrelatedly, from TFA:

It [Wal-Mart] will sell "Pirates of the Caribbean: Dead Man's Chest" for $12.99, meaning it will take a hefty loss on each DVD to drive foot traffic in stores.

If they're taking a loss at $13 per DVD what's the real cost? If Wal-Mart buys 300,000 copies of something, do you mean to tell me they're paying more than $12.99 per movie?! I thought they were these great negotiators, cutthroat distributer killers. Or does that only work on toilet paper and tools made in China?

Re:Jump in logic

[ConsumerOfMany]

I'm not so sure about this one though. I think there would be major negative effects for Walmart if the average shopper and their kids could not buy the latest Nemo or Tarzan etc in Walmart. It might just make them go WTF and head over to Super Kmart or wherever.

Danger! Image Collision!

[ml10422]

I dunno if this is such a good idea. We're talking a huge collision in image between Apple and Wal-Mart. Apple's image is hip, liberal, urban. Wal-Mart's is working-class, conservative, and rural.

Here's an idea . . .

[Orange Crush]

Why not (in addition to coupons and such) have ipod movie kiosks in between the DVD racks? I mean, the real advantage in going to a brick and mortar store is instant gratification. Some people have iPods and dial-up (primarilly ripping music from CDs and not fussing with video) or slower broadband (a full movie can take a while to download). I can see the benefits of a store like Wal-Mart having a library of titles locally cached that can be rapidly transferred to the customer's iPod . . .

This is about access to sales

[thinkzinc]

Apple is blocked from selling movies from major studios (minus Disney because Steve owns shares). Wal-Mart sells 40% of the movie industry's DVDs. When they shook the table, the industry sat on their hands. A deal between Apple and Wal-Mart is a deal BETWEEN devils. Believe me, if Apple had the leverage that Wal-Mart did, they would employ the same tactics. Look at DRM and the .99 cent song. If people don't like it they should continue to rent DVDs or buy them. This parnership marks a new way of doing business. Now that Apple can sell the movies online, the door is open to other online suppliers like AT&T, Comcast and Amazon.com. Microsoft will shuffle in the door late as usual.

Censorship

[boristdog]

Will the movies be the "Wal-Mart Censored" version?

A friend bought a copy of "Fast Times at Ridgemont High" at Wal-Mart.
Everything about the abortion was missing from the film.

I've heard other stories about movies from Wal-Mart as well.

Only for BIG suppliers

[alexhmit01]

Those deals are only for the BIG suppliers with SHORT turn-around deals. Wal-mart is a vicious customer, but can deliver HUGE volumes. They have also moderated themselves, as suppliers stopped working with them when they got too cutt-throat. The buyers have been reigned in, because big accounts like Rubbermaid became problematic. A friend in marketing at Rubbermaid was telling us that while the "buy on sale," where Walmart accepts the inventory at their cash register has pushed the inventory holding risk to the suppliers, it's only on products that are sold within 2-3 days of being in the store. Wal-mart doesn't waste shelf space on items that don't turn-over.

The suppliers are actually happy with the arrangement, because it's a deal point, and they can extract better pricing by working with that system. While I'm sure that Wal-mart has played hardball as you described, it's a little overstating to suggest that that is the normal way of doing business.

My friend also suggested that the buyers have been becoming less adversarial, and trying to produce more win-wins. Sure the Wal-mart culture is there... normally buyers get taken out to lunch with salesmen who entertain them... a bit of sneaky corruption, the buyers are pushed to gives a little bit of the company's money to get well treated by the salesmen. At Wal-mart, salesmen go to Wal-mart HQ, no meals are allowed. All negotiations take place in a small room at Wal-mart HQ. By keeping their buyers from trading favors with salesmen, they keep their costs down.

Walmart does MANY things... they are aggressive, but not necessary under-handed. However, they have a LOT of maneuvering room in the industry, and if they can make real money by selling Apple iTunes movies in the store, they WILL bring market pressure on the studios to play ball.

Alex