Not Much Digital Divide Left in Home Entertainment Retailing12 Dec, 2004 By: Kurt Indvik
Last week's reports about online initiatives regarding DVD from both Amazon and Wal-Mart are perfect examples of the growing impact of the Internet (and other digital distribution pipelines) on the home entertainment business. The impact is only going to widen, and any brick-and-mortar retailer, big or small, who is not actively seeking any and all legitimate ways to leverage the Internet for their business may wake up one day in the not-too-distant future to the rude awakening that their business model is outdated.
First, and I think most interesting, is the purported trial balloon Wal-Mart has been floating around Hollywood recently about a system for letting customers order DVDs at the chain's Web site to be burned onto a recordable DVD at the nearest available Wal-Mart where the customer would go to pick up their movie. The program, according to studio executives, would apply only to titles not on the retailer's shelves. The reaction from studios has been pretty much negative, and much of that directed at concerns for piracy potential. Wal-Mart told Video Store Magazine that it does not comment on its discussions with studios, “but if this is something that we thought our customers would want in the future, we'd certainly look into it.” So … maybe they're looking into it?
Studios have been bemoaning the fact that shelf space for DVD at major retailers is not expanding appreciably, and given that, this may be Wal-Mart's way of expanding its sellthrough selection without having to commit to additional physical SKUs on the shelf. The massive chain is already into online rentals and, at some stores, CD burning, so it's proven that it has the will to invest in, and stay with, digitally delivered home entertainment. Given its massive market share and buying power, it may just drag Hollywood, albeit kicking and screaming in some cases, with it.
Meanwhile, Amazon last week made the move Netflix had warned about by launching an online rental business of its own in the United Kingdom. As reported in this week's VSM, the twist to its entry into the online rental business is that it caps its customers to a maximum of three to six rentals per month under the two low-priced plans it offers. Not a bad idea if it's looking to start with a niche in the market that appeals to the not-so-frequent renter (maybe because he's buying more now?) that would love to rent online, but doesn't necessarily want to commit to getting his $17 - $20 bucks worth every month. Maybe that's not that small a niche. If they find that to be the case in the U.K., doubtless we'll see the program jump the pond in 2005.
The point is, these are options that obviously have enough potential critical mass support to attract the biggest of the big, not only in the traditional retail space, but the online retail business. The digital divide between online and brick-and-mortar retailers is dissolving quickly.
It remains to be seen how far down the retail food chain Web-based sales and rentals can go in traditional retail outlets, and 2005 ought to be a year when we get a good indication.