Wal-Mart launches downloads with low price
UPDATE: Beta service offers movies, TV shows from all major studios
By Jennifer Netherby -- Video Business, 2/6/2007
FEB. 6 | Wal-Mart launched a beta movie download service today with movies from all the major studios and pricing that undercuts Apple iTunes downloads.
New release downloads on Wal-Mart sell between $12.88 and $19.88, while catalog movies will start at $7.50 and TV shows at $1.96.
The retailer is the only download player that has deals with all of the major studios—20th Century Fox, Walt Disney Co., Lionsgate, MGM Studios, Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Bros. The retailer has TV deals with Comedy Central, CW, Fox, Fox Reality, 20th Century Fox Television Classics, MTV and others.
Feb. 6 new releases Hollywoodland (Universal), Running With Scissors (Sony) and Flicka (Fox) were all available for $14.88 on the site, www.walmart.com/videodownloads. Catalog films ranged in price from $7.50 for Mean Girls to $9.88 for The Italian Job.
Wal-Mart’s pricing is just below that of iTunes, which has movie deals only with Disney and Paramount. ITunes is the most popular movie and TV download site, but its low pricing has raised concern in the industry from retailers and been used by some major studios as a reason for not offering their movies for download through the service.
ITunes sells new release movies for $12.99 to $14.99 with catalog movies starting at $9.99, which is what Mean Girls and The Italian Job sell for on the site. TV shows sell for $1.99.
Last year, Target raised concerns over iTunes’ pricing, sending a letter to studios calling for a level playing field on pricing of DVDs and movie downloads. Download companies also have blamed Wal-Mart for keeping studios from moving quickly into the download business to protect DVD sales.
One industry insider said Wal-Mart is paying wholesale DVD prices for downloads, even if the retailer is selling them for less. Apple, which isn’t selling movies or TV shows as a loss leader to drive other sales, has refused to pay wholesale DVD pricing for downloads, he said.
With its downloads, Wal-Mart seems to be continuing its in-store strategy of pricing movies low to draw in customers for other, higher priced products.
Industry sources say the company plans to integrate the service into its regular retail Web site so consumers can easily find other products, such as TVs, while downloading movies.
Wal-Mart’s divisional merchandise manager for digital media Kevin Swint said in a statement announcing the service that the company plans to further expand “to offer a comprehensive online home video shopping experience that meets our customers’ growing needs and allows them to shop a deep selection of movie/TV content in a variety of formats, including video downloads.”
Movies will be available on Wal-Mart’s download service the same day they debut on
DVD, as is the case with iTunes, Amazon, CinemaNow and Movielink. Wal-Mart has more than 3,000 movies and TV episodes available for download.
“This marks a significant step for Wal-Mart in home video and enables us to better serve our customers as they begin to complement their DVD purchases with downloading of digital video content,” Wal-Mart’s Swint said in a statement announcing the service.
Last November, Wal-Mart launched a trial download of Superman Returns, allowing users to buy a digital copy of the film for $1.97 after buying the DVD in stores. The retailer will continue to offer DVD buyers the option of purchasing a digital copy for a small additional price. However, customers also can download movies from the retailer’s Web site without visiting a Wal-Mart store.
“The power of the Wal-Mart brand gives a lot of credibility to the format,” said Sony Pictures Home Entertainment worldwide president David Bishop. “It has always been our mission to increase the home entertainment pie, to make sure wherever there is a consumer ready to buy or rent, we are there. This is a big step toward that.”
CinemaNow CEO Curt Marvis said Wal-Mart’s entrance into downloading could help free up more content for all providers.
“One of the biggest roadblocks in the business for a number of years now has been studios not wanting to upset a retail giant in the form of Wal-Mart,” Marvis said.
Despite its heft in DVD, Wal-Mart is still unproven in the online world, causing little concern just yet for smaller competitors such as CinemaNow. Wal-Mart closed its online DVD rental service in 2005 after it failed to gain traction and hasn’t been a leader in music downloads, even with its rock-bottom pricing.
Yankee Group analyst Mike Goodman said the Wal-Mart deal doesn’t mean much right now. “This is more of a long-term play than a short-term play,” he said. “This is not going to move the needle for Wal-Mart earnings/revenues anytime in the near future.”
Goodman said Wal-Mart is getting in the business now so it controls a piece of the pie when digital downloads become a bigger business.
“You have to place your stake today even though it’s not a revenue driver,” he said.
Wal-Mart’s download site is powered by HP Video Merchant Services. Users can choose to get a download for their PC or portable devices that are compatible with Windows Media DRM. Downloads won’t play on Apple iPods.
Customers can browse films on the site through a new “movie connection” technology, which includes preview trailers, TV network listings and connections between actors and directors across a catalog of films. HP’s technology also allows users to search for movies across all formats—whether the film is available as a digital download or on DVD.
“We anticipate further expanding this service to offer a comprehensive online home video shopping experience that meets our customers’ growing needs and allows them to shop a deep selection of movie/TV content in a variety of formats, including video downloads,” Swint said.
