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Wal-Mart's Movie Download Store: Par For The Course, Except Prices End in $.88

from the yaaaaaaawn dept

Tue, Feb 6th 2007 9:39am — Carlo Longino

When Apple was negotiating with movie studios to get the rights to sell movie downloads through the iTunes Music Store, Wal-Mart got a little worked up and expressed its disdain for movie downloads to the studios, in an attempt to protect its position as the country's leading retailer of DVDs. Apparently it got over that, as it's now launched its own video download store, selling movies from the six big major Hollywood studios, and TV shows from a handful of networks. After Apple started selling movies, Wal-Mart was apparently lobbying for better wholesale pricing and marketing support from the studios for its download service. It's not clear if it was successful, but it would certainly appear that its strength in DVD sales, as well as its support for variable pricing, won it wider studio support than Apple's been able to gain. But that's probably irrelevant, since the Wal-Mart service sounds like it's just as bad as all the other ones to come before it: no DVD burning, limited PC compatibility, and restrictive DRM. While some older movies may be relatively cheap at $7.50, it doesn't sound like the prices it's talking about for new movies (about $13-$20) will offer much, if any, savings over the price of a DVD. So let's see here: a minimal amount of added convenience, in exchange for a movie most people won't be able to watch on their TV or put on a portable player, as opposed to a DVD for pretty much the same price. Yup, sounds like a typical movie-download service, so expect the typical level of success to follow.

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24 Comments

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Simon, 6 Feb 2007 @ 10:26am

Why do they bother?
"We can't compete with free!"... well maybe not on price, but how at about at least matching the features of illicit downloads?
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Erv Server, 6 Feb 2007 @ 11:06am

the illegal sharing continues because of this
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wifezilla, 6 Feb 2007 @ 11:07am

der!
Again my math skills will ruin a perfectly good scheme...errr....money making opportunity for an already weathly corporation.

DVDs require packaging, which required graphic designers, printers, binders, and machinery to duplicate the dvds. Plus you have to have people stuff the inserts, shrink wrap the DVDs and put them in boxes for shipping.

Then they have to be shipped to retailers who require more labor and effort to sell and display them.

I think it is totally cool that this can be done for less than $20.

However, on a dowload site, I am using my bandwidth, my time and my computer to get the movie. No packaging, no shipping...sure there is some nerd labor, but not nearly the manhours required to produce the physical dvd. In return for saving the studios and retailers a TON of money, they cripple the file so it is mostly useless and then want me to pay the same price.

HELLLLOooOOooOoo!
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Anonymous Coward, 6 Feb 2007 @ 12:02pm

Still costs associated
You say you are using your bandwidth, while true Wal-Mart still has bandwidth costs to get it to you. I agree with you that there should be a price break because bandwidth is cheaper than a human is, it's cheaper than diesel fuel, trucks, etc...

There is a new digital revolution coming that all media will be delivered to our homes digitally. The phone companies are working on delivering fiber to our front doors to make our TVs and other equipment IP-based.

I for one am pushing for this technology; just imagine a new release hits the self on Tuesday morning and could be on your TV before the stores open. Not to mention if it's a popular item it may be sold out. You can't sell out of something that is digitally managed.
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rediculous, 6 Feb 2007 @ 12:03pm

Not for free
It still amazes me how some individuals still fail to see the costs associated with technological breakthroughs. (Not necessarily a breakthrough for the industry, but possibly for WMT).

First, there are the development costs, in this case, the expenses associated with implementing the technologies necessary to deliver the videos over the new medium. These can be astronomical, and aren't limited to server, software engineer, and IT expenses. These could also include paying in-house web designers, UI designers, customer service reps, etc. (all of this, as opposed to simply purchasing DVD's from the studio/registered vendor)

Next, there are the fees associated with paying for the rights to distribute the files...this is significantly higher than simply purchasing the DVD's from a studio.

After this, there would be the marketing and sales expenses related to the new product line. People can walk into a wal-mart, and see the DVD's they have for sale...but if there aren't any additional advertising efforts, people may never know there are movies available for download from WMT.

These are only a few of the costs associated with delivering movies over a new medium. It's no wonder the prices are set the way they are.

It will take time to reach economies of scale significant enough to reduce the price without creating negative margins.

If people would stop typing, and simply attempt to consider other related variable expenses, posts like #3 (wifezilla) would never happen, and the world would be a better place!
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LOL, 6 Feb 2007 @ 12:14pm

when will they learn that consumers approach movies differently than music?? we're not that dumb you know. maybe a small portion of us will tolerate your DRM tactics for music, but for movies? it's just a price we're not willing to pay!!!
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really rediculous??, 6 Feb 2007 @ 12:17pm

You work for them? say hello to your uncle RIAA and your aunt DRM..hehehe!
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bnonymous, 6 Feb 2007 @ 12:22pm

Re: Not for free
Sorry, your argument just doesn't hold water. Sure there are startup costs for this service, but its not as if has to figure out how to provide the service all by their lonesome. They're not reinventing the wheel here.

No scale of economies here either, because there isn't a substantial amount of overhead to be amortized. Most of the cost would be fixed and ongoing. You can be sure that they have analyzed this down to the smallest detail and know how much to charge per movie in order to be making money in short order.

If you would stop typing, and simply attempt to consider...oh, wait...you already said that :-P
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SUE ME!, 6 Feb 2007 @ 12:52pm

RE: Not For Free
kudos to really rediculous!!LOL ... I mean i agree with bnonymous, all they really have to worry about is how to attract consumers or how to fool them is more likely..
its more like highways and roads as to automobiles dude! the roads and freeways have always been there, all they did was put another car in the road. whether the car sells is up to the consumers...
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rottie, 6 Feb 2007 @ 12:53pm

Correct pricing
I agree that the pricing should be adapted to a more "realistic" level if DRM or other security is involved.
If I can't create a DVD from the movie to watch it on my tv it has the same (actually less) value then a rented movie. Because a month later I wont have the necesary diskspace to keep the movie and it will be deleted (not to mention harddisk crashes, new computer, ... )
So, if it has the same or less value, the price should reflect this.

However, if I can buy (download) a movie that enables me to write it to DVD (any format: PSP, cellphone, even ascii should i wish it) then asking a full DVD price is justified. Because I will know that I will still be able to watch the movie a year later, even if I changed computer, tv, .. whatever.
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hanibalisticationanator, 6 Feb 2007 @ 1:24pm

...just don't get it
It actually costs MORE to deliver content over the internet than it does to simply buy dvds at wholesale and sell them on shelves that Wal-mart is going to stock anyways.

I don't know what the person meant when they were referring to amortization, but I don't think it really has anything to do with economies of scale. It is about decreasing the expense of an asset over a set period (useful life).

The price seems too high to actually be a feasible alternative (to the consumer) to actually buying DVD's.
If WMT analysts had seen a way to set a lower price, they would have.

I see a post above where someone says that they're using their bandwidth, and their computer to download the movie...so it should be cheaper. Last time i checked, you had to use YOUR car and YOUR gas to get to wal-mart and pay them by taking money out of YOUR wallet in YOUR jeans.... Seriously...lets look beyond the end of our nose before we start blogging.

It's blatantly obvious who here has Business experience and who is sitting in a dorm room.
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haywood, 6 Feb 2007 @ 1:37pm

Re: Not for free
You miss an essential point, the same technology the pirates are using is already worked out. Worked out quite well at that. So all they need do is compress the movie, password it, put up a torrent tracker and let it roll, with a dedicated server, it should come in at better than 700 mb per hour. The only costs are those of reinventing the wheel.
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name, 6 Feb 2007 @ 1:46pm

Re: ...just don't get it
I see a post above where someone says that they're using their bandwidth, and their computer to download the movie...so it should be cheaper. Last time i checked, you had to use YOUR car and YOUR gas to get to wal-mart and pay them by taking money out of YOUR wallet in YOUR jeans.... Seriously...lets look beyond the end of our nose before we start blogging. ... I don't understand what you are getting at. If I used MY car, MY gas...then I now use MY computer, MY internet connection. I will still be using MY wallet in MY jeans to pay for both DVDs. I am not getting the same thing though. If I buy a DVD at a store, and my car breaks down...I can still watch the DVD. If I buy a DVD online and my computer crashes or hard drive gets damaged...I am pretty much screwed.
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Wizard Prang, 6 Feb 2007 @ 2:00pm

Who said it was free?
The difference here is that all of your costs are sunk before the first copy ships. After that, your only costs are bandwidth and server time. A real-world DVD has recurring costs with each physical copy that is on the shelves.

As for "astronomical" costs, Apple manages on less than 10c/song... and on that they developed iTunes on Mac and PC, and run the iTunes store.

There is a cost... but it is damned small when amortized over thousands or millions of copies.
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LShaw, 6 Feb 2007 @ 2:01pm

Price isn't everything
Strictly speaking from a Market perspective if as a business I can control my product and limit competition thus increase my product line I would do it. Profit is not a dirty four letter word. You all work that post to this forum, what if your company did not try to protect itself in the market? You think you would still be employed or making the same amount of money? The system cannot be set up so that just the consumer wins and the seller takes all the risk. I am not agreeing or disagreeing with another post, but I do not think that it is as simple a process as some of you have written.
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Wizard Prang, 6 Feb 2007 @ 2:02pm

Agreed
Nobody has been able to explain to me why a DRM-ridden e-book has to cost the same as - or even more than - a paperback (or sometimes a hardback). For something that cost pennies to produce and is locked down to a specific player, that is not good enough.

And they wonder why the e-book market is dead in the water...
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Anonymous Coward, 6 Feb 2007 @ 2:30pm

Re: Still costs associated
"The phone companies are working on delivering fiber to our front doors to make our TVs and other equipment IP-based"

HAHAHA, hehehe, oh, that was absolutely hilarious. I love that line...

They have been talking and trickling tidbits for years. No major telco has plans to roll this out en mass. All of them are doing piece mail projects in spotty locations. Find one major city where a quarter of phone customers have FTTH and I show another crappy FCC report on broadband penetration.
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Solo, 6 Feb 2007 @ 3:09pm

Don't they realize they also have to compete with rentals?

$14.88 for a download, that I can only watch on my PC, that I can't share with my niece or mother, that certainly will look crappier than the DVD.

Plus having to use internet explorer. Plus sharing a host of personal info with walmart that will keep it forever.

It really sounds like a good deal!
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|333173|3|_||3, 6 Feb 2007 @ 5:36pm

If you have to use IE, then someone should report tham to the Mozilla evangelisation organisation to pester them until they fix thier site.

All the details of the system are already done, since they have some sort of shopping cart for online purchases, it would be a trivial task to allow you to download the movies you purchased. Some sort of script should be able to provide a link on the HTTPS page which you can download to your desktop. Whilst this would notbe overly hard to crack, I doubt that anyone would bother, since it would be easier just to torrent the DVD. THis would leave as the only major costs the liscencing, which should be no more than a DVD, and the hardware.
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Dosquatch, 6 Feb 2007 @ 5:36pm

Re: der!
I think it is totally cool that this can be done for less than $20.

Far, far less than $20. All of the stuffing, shrink-wrapping, and boxing is automated as well. Bulk duplication cost, including shipping to the studio's warehouse is less than $2/ea. Physical media is cheap.

The studios sell these to Wally World for a hefty markup to cover marketing, royalties, their cut, etc. at which point Wal-Mart sells them for a hefty markup because that's the nature of their business.

Any doubts to this should be covered by the budget bin, and the knowledge that WMT is making between 30% and 40% margin on every one of those "2 for $11" and "3 for $12" movies they sell. The media is the same as the new release they're selling for $22.
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Dosquatch, 6 Feb 2007 @ 5:42pm

Re: ...just don't get it
If WMT analysts had seen a way to set a lower price, they would have.

First, bull.

Sorry. What I mean is, I think you have more faith in the magnanimity of Wal-Mart than they deserve.

Second, the studios are dictating the price. Wal-Mart negotiates for a price that they believe will draw enough customers to make the venture worth doing, but it is still a dictated price. That means it is arbitrary. That means that the price charged has NO DIRECT BEARING on the cost of distribution.
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Follow the Porn, 6 Feb 2007 @ 7:54pm

Porn will lead the way
This exact same argument was basically in effect back when beta went the way of the dodo!! If you follow what the Porn industry is doing the reset of the business world will eventually see the dramatic earning potential and follow suite. Direct downloads and live content (on demand) are coming soon. First it will be to the computer, then when we finally get fiber to the home it will be to the entire house (tv, fridge, shower etc.). Unfortunately while that happens over the next 10 years lots of cyber wars are going to be started and finished over DRM. Eventually they will follow what the pirates have already done: set up a torrent atmosphere (to share the bandwidth cost with the customer) and you pay for the password after download (for the content), and the way of the cable providers for the on demand make it part of a service contact or pay per view for an outrageous fee. Which all still sux as far as im concerned. I sticking with privately created and distributed content!! Hooray for the local film maker. Screw Hollywood and RIAA and MPAA and most of the music scene for that matter.
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ScytheNoire, 7 Feb 2007 @ 12:06am

over-priced, over-protected
does it have DRM that prevents my choice of players?
is it significantly cheaper than buying the DVD?

buying moving downloads from this site would be like paying $150 for a DVD that will only play on Toshiba DVD players with model numbers ending in 3's and 5's.

this will end up failing fast once people see the price and the DRM restrictions. you can get better quality, better selection, faster releases, faster downloads, without DRM restrictions from other free sources.
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Wifezilla, 7 Feb 2007 @ 1:36pm

Dorm Room???
Disagree with my analysis or my choice of analogies if you must, but making cracks that I am sitting in a dorm room...sheesshh.

Well, I happen to own a business.... a printing/graphics/marketing company with a retail location. I know how much reproducing a DVD costs because it is something I actually DO.

Anyone who thinks it costs more to send a completed file over the internet as it does to burn the DVD, create the packaging and ship is smoking something funny.

As another poster pointed out, the cost to Wally World for a DVD is WAY less than $20...I was speaking as to the costs to the consumer. I KNOW it isn't going to cost Walmart the same to send me a file as it did to get that DVD on the shelf. So I would have to be stupid to pay the same amount of money for the file (that I can't use the way I want anyway) as I do for the physical DVD.

And speaking of ebooks...yeah...DRM has pretty much screwed that up too.

In conclusion, I guess it is better for people to think I am sitting in a dorm room while I am actually running my business than to actually be living in my parent's basement smoking pot as I assume some posters must be.
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