Report: Target warns studios over digital DVDs
Discounter is concerned that new movie download services will get better deal from studios than it gets on DVDs.
NEW YORK (CNNMoney.com) -- Target has sent a sharp letter to movie studios expressing concern that new movie download services will get a better deal from studios on electronic movie copies than the retailer gets on DVDs, according to a published report Monday.
The Wall Street Journal, citing people familiar with the matter, reported big-box power sellers of DVDs like Wal-Mart (Charts) and Target (Charts) are struggling to adapt to new digital formats because they don't want to see movie-downloading services become more popular and gain an advantage with consumers over conventional DVDs.
Wal-Mart, the world's largest retailer, accounts for roughly 40 percent of the market for big-studio DVDs, while Target, the No. 2 discounter behind Wal-Mart, accounts for about 15 percent of the market, the report said.
According to the Journal, Target said in the letter than the company didn't object to competition but "wanted a level playing field."
The letter from Target president Gregg Steinhafel went on to say that if it didn't receive what it considers to be equitable pricing from the studios, it would reconsider its investment in the DVD business, the paper said, suggesting that the retailer might cut back on shelf space, promotional programs, signing and other aspects of marketing the product.
Further, Steinhafel said the chain had become aware that "some movie studios have made some new-release movies available to download service providers at lower cost than DVDs," the report said.
A Target spokeswoman told the paper that the company is trying to ensure that its business "is not put at a disadvantage."
The Journal said Target's move follows similar complaints from Wal-Mart. For its part, Wal-Mart sent a top executive to Hollywood to to convey its misgiving, the paper said.
These reactions from Target and Wal-Mart come a few weeks after Apple Computer announced a deal with Disney to sell electronic copies of Disney movies online via Apple's iTunes store for as little as $12.99 apiece for new titles.
Retailers like Target and Wal-Mart typically pay $17 and $18 wholesale for new release DVDs, and the retail price varies from $16 to $19.
But Wal-Mart, which is also a big seller of Apple (Charts)'s iPod digital media player, softened its stance after Apple CEO Steve Jobs complained to Wal-Mart CEO Lee Scott about what he considered to be Wal-Mart's anticompetitive behavior.
CNNMoney.com reported last month that Wal-Mart was potentially accelerating its efforts to launch a digital movie service in the months ahead.
The paper said the studios are eager to put off any escalation of the pricing battle until after this year's November-to-January holiday shopping period, which is typically the most important sales period for retailers.