It wasn’t really a game of chicken because, well, in chicken, both parties have an equal chance. It wasn’t really a showdown because, well, in a showdown, it’s about being quickest to draw. It wasn’t even really a standoff because, well, Disney had very little to lose.
So when a retailing giant goes up against a major motion picture distributor and demands different prices or they’re going to cut back on efforts to sell the distributor’s products…and then said giant realizes that it’s on the cusp of the year’s biggest sales season and on the cusp of the release of what will surely be the year’s biggest DVD seller…what is it called? Tucking your tail between your legs and begging for forgiveness?
Target wanted both better prices and and admission from Disney that the entertainment company done wrong. Disney countered with the (correct) notion that purchasers of physical media get all those little extras that make the whole purchase so very special: deleted scenes, director’s commentary, a cute booklet, endless commercials…
DVDs cost more than downloads on so many levels. It make zero sense to price the two mediums at the same level, even on the wholesale level. If anything, Apple should be reading accounts of how the battle came about and how the two companies settled the deal. Apple is probably being grossly overcharged on a wholesale level for what they’re getting from Disney. That’s mostly because the studios don’t fully trust this whole new media thing.
DVD sales are, currently, down, as we all know. There is no telling if this is a permanent condition or a long-term slump. Or the shape of things to come — which is more likely the case. People who might have in the past decided to buy the movie are now thinking “why not just download?”
You know that the studios are getting antsy — their forays into scan-based trading (“SBT”) suggest that they realize growing the market, or at least extending the market as long as possible, requires moving into new retail venues. SBT allows the studios to place product in these outlets, while ensuring that these businesses are sheltered from financial risk by ensuring that the studios continue to own the inventory…while the money split happens when a unit is actually sold. Studios do the stocking, do the replenishing, and take their stuff out of the stores when it doesn’t sell.
Needless to say, Wal-Mart pioneered this concept; there’s a retailer who never met a risk it didn’t want to take. But it is allowing for DVDs to be sold in new and different places. Whether it stops the bleeding is another issue entirely.
So in this battle of the giants, Target (and Wal-Mart, too!) never stood a chance. Target needs to heavily promote Pirates of the Carribean: Dead Man’s Chest. While it may seem cute and retaliatory to hide Disney merchandise in obscured places, Target forgot that many people shop by title. They don’t go to the store and say, “I’m here to purchase the latest release by Disney…and while you’re at it, bring me one of the entire catalog.” Consumers buy Cars; if Target doesn’t make it easy for consumers to get what they want, well, there’s always Amazon.
Target blinked in this showdown, though I’m sure Disney made it all better with a little something extra to ease the pain. But what makes this whole story even more interesting is a paragraph buried at the end of the Los Angeles Times article on the, uh, truce:
If Target had imposed drastically reduced shelf space on Disney, other studios would have been more reluctant to make their own cut-rate deals with Apple, which wants uniform pricing in its catalog. Rival studios are suspicious of the deal because Apple CEO Steve Jobs has become a major Disney investor and director thanks to the sale of Pixar to the company.
Uh no. Other studios would not have been more reluctant to cut deals. They’re fighting the losing battle against pricing and will continue to make a stink about profits and other notions, but they’ll come around. Studios will go where the consumers are, and right now the consumers are at iTunes. You don’t have to hang around the motion picture industry for very long before you realize that every studio is gearing up for major business in the digital realm.
It’s not the studios who need to play nice — in this case, it’s the retailers who need to change the way they look at the business.