If it's good enough for Wal-Mart (NYSE:WMT), it may as well be good enough for cheap chic rival Target (NYSE:TGT). Just as Wal-Mart has been presumably pressuring movie studios not to undercut DVD prices to digital downloading sites, Target also sent a stern letter to major movie producers, according to yesterday's The Wall Street Journal.
In the missive, Target President Gregg Steinhafel warns that if upstarts selling downloadable flicks, like Apple (NASDAQ:AAPL) and Amazon.com's (NASDAQ:AMZN) new Unbox service, get better prices than Target does, it may consider cutting back on its commitment to DVD retailing.
Boy, do these discount department stores have a lot of nerve. The download services are already selling an inferior product. The picture quality isn't exactly the same. The DVDs lack any of the special features beyond the film itself. Now Wal-Mart and Target want the same pricing for a superior product?
As far as the studios are concerned, they have every right to sell digital copies at cheaper prices. They don't have to burn, package, and ship out digital copies. There are no debilitating returns from the retailers once the first wave is over. The public argument is that it will take years before digital downloads make a dent in the conventional DVD retailing business, but the reality is that Wal-Mart and Target are just getting greedy.
The same chains that drove specialty DVD retailers out of business by pricing titles at cost are now the ones crying foul. That's karma, baby.
I hope the studios don't take the threat too seriously. Yes, Wal-Mart and Target are their leading outlets for physical distribution, but does anyone really think that the discounters will risk alienating their customers by not stocking the new releases that they covet?
There is really only one appropriate response that should be coming from every major motion picture studio.
Dear Wal-Mart and/or Target,
Congratulations! We concede to your demands. You can now have the same wholesale pricing as our digital downloading partners do. Please keep in mind that you will be required to burn your purchases for your eventual customers and provide the clamshell with original artwork. The disc will contain just the movie at a feasible streamed compression quality. You will pay us immediately. Naturally you will swallow any returns.
It has been a pleasure doing business with you. Let us know if you would like to revert to the old pricing and product specs in order to hold off your obsolescence for a few years longer.
Your friend,
Hollywood
Any response that falls short of that tone or concedes too much is just begging to be abused by traditional channels that have already wielded too much power.
For more digital media missives, check out:
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Longtime Fool contributor Rick Munarriz has probably spent more at Wal-Mart's online store than at its offline empire in recent years. He does not own shares in any of the companies in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. T he Fool has a disclosure policy.
