Both Apple and Wal-Mart are negotiating with thugs who want $14-17 for a 50¢ piece of plastic! And we all know what a wonderful job Wal-Mart does selling downloads — instead of cotton-poly t-shirts and disposable diapers.
The guy from Bentonville, Ark., surely isn’t on any of Hollywood’s leading man lists. A 23-year Wal-Mart Stores veteran, David Porter is the person at the retail giant who orders DVDs and slashes prices to move them. But this summer, Porter has been one of Hollywood’s hottest acts, taking meetings with top studio brass like a producer with a hot script. His pitch: Wal-Mart isn’t happy.
That prospect tends to send shivers through Hollywood’s Gucci-toed corner offices. As the largest seller of DVDs, Wal-Mart accounts for roughly 40% of the $17 billion in DVDs that will be sold this year, a financial lifeline to big-spending studios. But now Wal-Mart’s video business faces a potential threat by Steve Jobs and Apple Computer, which in mid-September, sources tell BusinessWeek, plans to announce it will start offering movie downloads from its iTunes store.
The notion of kids running around with full-length movies on new, wider-screen iPods that Apple is expected to unveil as well is causing grief in Bentonville, according to Hollywood executives.
What does Wal-Mart want this time to play nice? Executives who have met with Porter say it wants marketing help when it launches its own planned download site. And it wants Hollywood to trim the current $17 wholesale price for DVDs. That would let Wal-Mart slash its own prices to the same $15 or so that Apple would charge. (The plan is for Apple to pay a $14 wholesale price for new releases, say sources, although negotiations continue.) A large wholesale cut for Wal-Mart, of course, would amount to hundreds of millions in lost studio revenues each year at a time when DVD sales are slowing.
Wal-Mart isn’t the only issue that’s giving some studios pause. Several are concerned about Apple’s rules for using iTunes, which let users watch a film on up to five different devices. And others worry about letting Jobs set a download price they can’t change, as he has done in music. Still, studios have embraced the digital concept and accept some “burning” of movies to DVDs.