Target, Disney in DVD truce!

[MadonnasManOne]

This is very interesting, to say the least. I knew that Target was mad at Disney, for giving Apple a cheaper price, but, I didn't know that it had gone so far.

I originally found this story on a local news website, but, the link wouldn't work. So, I went to Google, and found another site with the information.

http://www.latimes.com/entertainment/ne ... es-entnews

Target, Disney in DVD truce

The upcoming release of 'Pirates' prompts the retailer to back off in a dispute over terms.

By Joseph Menn, Times Staff Writer
November 18, 2006

With the holidays and the DVD release of the blockbuster "Pirates of the Caribbean: Dead Man's Chest" approaching, Target Corp. and Walt Disney Co. appear to have reached an uneasy truce in their standoff over terms in the rapidly changing home-video business.

Target made Disney testy in September, when it fired off a letter demanding the same low wholesale prices on DVDs that Apple Computer Inc. is paying Disney to offer movie downloads over iTunes. At the time, Target threatened to cut back on its efforts to sell Disney's DVDs.

Disney countered that DVD buyers get something different from what iTunes customers get: an actual disc packed with commentary, deleted scenes, trailers and other extras. Disney charges conventional retailers about $16 for new DVD releases, between $1 and $2 more than Apple pays.

The dispute set off a game of chicken that, at least for now, has eased, according to accounts provided by people familiar with the details. They asked not to be identified because the subject remains tense. Disney declined to comment, and Target executives didn't return numerous calls over the last two weeks.

Shortly after sending its letter, Target ordered its stores to take down a multitude of internal signs steering customers to Disney products. Target also bumped an end-of-aisle display of Disney DVDs to a less favorable location, store employees said. In its place went displays of new children's releases, the vast majority of them distributed by Disney's competitors.

"Everybody sort of assumed that Target would retaliate," said a former top Disney competitor who has been following the dispute.

But Target had a dilemma. It didn't want to bury "Cars," the hit animated film made by Disney's Pixar Animation Studios. Retailers count on hit DVD titles to bring customers into stores, hoping they'll spend money in other departments. "Cars" has had the strongest DVD debut this year.

Disney tried a gentle approach to appease Target, but it also hinted at more dire consequences if the retailer didn't cooperate with the Burbank entertainment giant.

Disney suggested sealing a deal that was in the works to license a Disney character for a product line made exclusively for Target. Target was hoping to build on the success of a 2-year-old contract that gives it exclusive use of an older rendering of Winnie the Pooh on infant clothing, strollers and lotion containers.

But Disney also indicated that it could play rough if pushed, inviting Target to contemplate a Christmas season without "Pirates," the No. 1 film of the year, due on video Dec. 5.

After that, the negotiations turned a corner. Target even agreed to put a display of "Cars" DVDs in a much-prized position in front of its checkout lanes. Target is expected to get its new character license this month, and negotiations on other issues are said to be continuing in a conciliatory vein.

In Disney's quarterly earnings conference call with investors last week, Chief Executive Robert Iger acknowledged "some tension" with Target and Wal-Mart Stores Inc., the largest seller of DVDs.

"We ultimately believe that that tension is going to dissipate over time," he said. "Have we had discussions? Yes, absolutely. In general, though, I think our relationship with these retailers is in good shape."

Executives have said Disney is working with Wal-Mart on that company's plans for its own download service, alleviating the pressure from the biggest retailer.

Although apparently resolved, the fight underscores the continuing tensions between studios that are trying to move to the digital age by offering their movies for download and retailers that have been important partners in turning DVDs into a gold mine for Hollywood.

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.

A rapprochement was the best outcome for both sides, analysts said.

"It's like jockeying for positions in a long-distance race," said retail industry analyst Mark Husson of HSBC. "You throw some elbows, but you can't win if you're jockeying the whole time. A natural commercial accommodation is made."

[w00t]

I buy more of my disney dvds from target than anywhere else

[Pluto Region1]

Wow, thanks for posting, Madonnas. That's a pretty interesting article. So what exactly is Target worried about - is it that they wanted the price of the DVDs to be the same as a downloadable movie on Itunes? I see the DVD market and the Itunes download as 2 entirely different markets. I don't think Target should be worrrying at all about the download market.

[2099net]

Well of course Disney's going to sell DVDs to retailers more than they're going to sell the same movies to iTunes for resale.

A DVD is a physical object. It needs to be manufactured, it needs to be stored and it needs to be transported. Plus, Disney are right - DVDs have more features. Commentary tracks and deleted scenes don't just magically appear from the "DVD Extra Fairy". All have to be comissioned, edited and authored.

<strike>Best Buy? Best of Idiots more like.</strike> Oops. It's Target.

[Lars Vermundsberget]

A DVD is a physical object.

Yeah - I think that makes quite a significant difference...

[Pluto Region1]

A DVD is a physical object. It needs to be manufactured, it needs to be stored and it needs to be transported. Plus, Disney are right - DVDs have more features. Commentary tracks and deleted scenes don't just magically appear from the "DVD Extra Fairy". All have to be comissioned, edited and authored.

You're absolutely right! Wasn't even thinking of this argument from the cost of manufacturing issue - I was thinking of it more in terms of the buyers - I think the type of person who is going to watch a downloaded movie is going to be different than the type of person who buys a DVD for their kids to watch or a collector who likes the physical product or buys it in anticipation of the bonus features.... but for sure Disney can argue from the cost to produce the physical product, package it, transport it, etc is much higher than the additional $2 per DVD (I would think) that they are charging the stores for the physical DVD product.

I think the store seems to think that the market for downloads and the market for physical DVDs is the same and therefore they need to be price-competitive with the downloads, but the truth is the motivations of the buyers of downloads is entirely different. They are worried about sales and the sales lost to downloads is probably going to be a drop in the bucket - nothing to even worry about.

[Simba3]

I hadn't even heard about this "feud" until now. To be honest though, I feel that Disney is in the right here. When you purchase a DVD from Target (or anywhere else for that matter) you get an actual physical copy of your product (casing, discs, inserts, slipcovers etc...) and you don't get that stuff when you just download the movie off iTunes. I don't know a whole lot about downloading movies from iTunes, but the way the articles presents the information, it makes it sound as though you don't get the bonus features that come along with the DVD either. In this case it isn't surprising that Apple pays a cheaper price to Disney for purchasing their movies because they aren't recieving an actual physical product of sort, just the rights to sell the download. Consumers wanting to go out and actually purchase a DVD should pay more than those simply buying the movie off iTunes because DVD buyers are getting a lot more with their movie purchase.

[Lars Vermundsberget]

I think the store seems to think that the market for downloads and the market for physical DVDs is the same and therefore they need to be price-competitive with the downloads, but the truth is the motivations of the buyers of downloads is entirely different.

They've got to be way off... I wouldn't even consider buying a download instead of paying just $2 more for the DVD.

[edsouth]

This is the first I had heard of any this also. I find it interesting because Target's bonus disc with the CARS DVD was far more "meatier" than the Wal-Mart bouns disc. Usually Wal-Mart has the upper hand in the freebie department, but I thought the Target disc had way more relavant stuff on in than Wal-Mart's Rascal Flatts DVD.

[jediliz]

I bought my copy of CARS @ Target and the copies of A Little Mermaid there for my two nieces. But I'll probably buy POTC2: Dead Man's Chest @ Best Buy so I can get those double reward zone points (Hey anything helps towards more certificates!).

I have bought non-Disney DVDs there mostly because its convenient and I don't get to Walmart very often.


I do wish they were a little more reasonably priced on their DVDs for the first week of release. $14.99 would be more fair.

[littlefuzzy]

Disney countered that DVD buyers get something different from what iTunes customers get: an actual disc packed with commentary, deleted scenes, trailers and other extras.

Sadly, many of Disney's discs don't include the original theatrical trailer...

Disney charges conventional retailers about $16 for new DVD releases, between $1 and $2 more than Apple pays.

Whoaa... Back the gravy train up! I could maybe see paying 5 bucks for a download, but 14-15 dollars for a download???

[bennyb98]

I wouldn’t expect that from Target, maybe Wal-Mart but then who knows...

[Owlzindabarn]

Target is so dumb. I know all the brick-and-mortar stores are worrying about downloadable movies, blah blah blah. But they're being silly--to remove or hide their existing Disney merchandise is just cutting back on their own sales, not Disney's. How stupid and childish of them. They're lucky I'm not a stockholder.

[kbehm29]

I had totally noticed that Target had dropped their typical Disney display many weeks ago. And I commented that their placement of the Cars DVD was weird. I never knew why until now - thanks for posting this article.

It's plain stupid to think that downloaded movies and physical DVDs should be priced the same. I hope that the physical movie never goes away - I hate buying things I can't see.

I hope Target wises up....I usually buy my DVDs from them.

[thomashton]

Whoa, whoa, whoa. Hold on there.

Did nobody else get floored by the line that Disney charges its retailers--even huge ones like Target--$16 per disc?!?!?

I knew at times these discs were loss leaders, but the retailer being charged $16 seems way too excessive. Makes me feel better about paying $9.99 on Black Friday for a new disc like TLM.

I can't believe that Target pays that much for each copy of the movie.

[2099net]

Whoa, whoa, whoa. Hold on there.

Did nobody else get floored by the line that Disney charges its retailers--even huge ones like Target--$16 per disc?!?!?

I knew at times these discs were loss leaders, but the retailer being charged $16 seems way too excessive. Makes me feel better about paying $9.99 on Black Friday for a new disc like TLM.

I can't believe that Target pays that much for each copy of the movie.

It seem's about right to me. its about half of what the disc's MSRP is. A 50% markup rate sounds about right. Although I guess some retailers may be able to negotiate a further discount. However, its not Disney's or any other studio's fault if shops decide to discount to remain competitive with other stores.