Why do new movies come out in video stores before they’re
available on Pay-Per-View?
The giant retailer, which accounts
for over one-third of the studios' video (including
DVD) revenues, depends on consumers coming into its
stores to rent movies to build traffic for its more
profitable merchandise. The studios help maintain
this traffic by delaying the release of movies on Pay-Per-View
(and other forms of video-on-demand) for at least 45
days. If the studios were to change their policy
and begin releasing their movies on Pay-Per-View at
the same time as they release them on video, a large
number of consumers would order them at home at the
same price and save themselves a trip to Wal-Mart (and
other stores). The big winners from such a change would
be the studios. Instead of getting just 40 percent of
the take, as they do from video rentals, they would
get 70 percent of it from Pay-Per-View rentals. The
big loser would be Wal-Mart.
Consequently, Wal-Mart has
quietly warned studios that if they advance their Pay-Per-View
release date, Wal-Mart will retaliate against them.
As one top studio executive put it, "They told
us, 'Don't bother to call us.' " The message
was clear: Wal-Mart might not put a studio's video and
DVDs on their prime shelves if it made Pay-Per-View
competitive with video rentals via a simultaneous release.
Not surprisingly, since Wal-Mart is a "monopsony,"
or a single buyer that dominates the market, the studios
have, so far, gone along with its request, even though
it has stifled their more profitable video-on demand
How is Rupert
Murdock proposing to deal with Wal-Mart on this issue?
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