Parents looking for a copy of 2014's beloved The Lego Movie won't be able to buy the movie on Amazon.com (AMZN 0.87%). A war between the country's largest e-tailer and Time Warner (TWX +0.00%) has brewed over prices on upcoming DVD releases. While this means The Lego Movie won't be available on Amazon, it could also spell long-term heartache for Time Warner's DC Comics unit.
Amazon doesn't want your kids to own "The Lego Movie"
Amazon has suspended the pre-sale orders of Time Warner DVD titles like The Lego Movie, 300: Rise of an Empire, and Winter's Tale. The movies are available for purchase as electronic copies, but physical copies are not listed on the retailer's site.
For Time Warner, this is a big loss as the movie did phenomenally in theaters, and kids movies are one of a few genres still moving well as physical discs. The Lego Movie grossed$251 million in domestic markets and a total of $425 million worldwide. The most recent popular kids movie to hit DVD, Frozen, sold 3.2 million copies in its first day.
In 2013, Time Warner had only one of the top 10 movies for DVD sales, with The Hobbit: An Unexpected Journey: the DVD release of The Hobbit ranked third with 3.2 million units sold. So far in 2014, Time Warner has only one of the top ten selling dvd's: Gravity ranks sixth with 1.0 million units sold. The Lego Movie is sure to give the company two movies in the top ten, but Amazon's exclusion might keep the animated movie from grabbing a spot in the top three. To make matters worse, Time Warner also has Godzilla coming to DVD in a few months and needs the problem resolved before then.
Time Warner currently ranks first at the box office with a 17.4% market share and $788 million in box office revenue domestically. The studio has consistently ranked in the top two spots for box office share over the past 10 years.
DC Comics could get squeezed out
Earlier in 2014, Amazon announced its acquisition of Comixology, a leading digital comic book store. The website sells comics from large giants like Marvel and DC Comics, as well as smaller comic book companies. Comixology's iOS App was one of the top performing at the time of the acquisition.
This new Amazon subsidiary could be trouble for Time Warner. The company can not afford a lengthy or public battle with Amazon, as the company could use this new asset as a bartering chip and delay the sale of DC Comic titles or take a smaller cut of revenue.
In 2013, Marvel was the No. 1 comic book company, both in terms of units sold (37%) and revenue (33.5%). DC Comics had a unit share of 33% and revenue share of 30.3%. DC Comics had three of the top 10 selling comic books for the year (2, 3, 10), compared to six for Marvel (4, 5, 6, 7, 8, 9).
The comic line of DC Comics could see a boost with a strong upcoming slate of films. Rumorsare popping up about DC Comics' new movie slate. This lineup includes Batman vs. Superman, Shazam, and The Sandman in 2016, Justice League, Wonder Woman, and a Flash/Green Lantern combo in 2017, and Man of Steel 2 in 2018. This strong lineup is another reason Time Warner needs to get its Amazon battle sorted out, as the retailer controls a large portion of future DVD sales of its movies, as well as comic book sales through Comixology.
Conclusion
In fiscal 2013, Warner Brothers was the biggest revenue driver for Time Warner. The unit saw total revenue of $12.3 billion, an increase from the prior year's $12.0 billion. Lower physical home video was cited as one of the few blemishes for the group. The potential of The Lego Movie not hitting Amazon's site will be a big blow for Time Warner.
Hopefully, sales of the DVD remain strong despite Amazon's decision. However, if DVD sales disappoint, Time Warner still has plenty to offer for investors. The company spun off its underperforming Time publishing unit, which will boost operating margins. Time Warner also has a great lineup of movies from the DC Comics brand coming that will keep the company on top of the box office charts.
