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Bullying the Studios

14 Aug, 2014 By: Thomas K. Arnold

The pricing dispute between Amazon and Walt Disney Studios is merely the latest skirmish in a 35-year battle between studios, who own the content, and retailers, who distribute it.

It also serves as an indictment of Amazon’s business tactics and, as the Washington Post observes, “power over the retail and media economy.”

Simply put, Amazon is putting pressure on Disney — as it did earlier with Warner Bros. — to get a better deal on Blu-ray Discs and DVDs. In a story Home Media Magazine broke, the giant online retailer is blocking preorders of several Disney titles such as Captain America: The Winter Soldier and Maleficent as a negotiating tactic for better pricing.

Amazon certainly has a big muscle to flex: Preorders typically account for up to 30% of “first day” sales, and Amazon is the biggest pre-seller in the business.

Amazon also happens to be one of the biggest retailers of filmed content, period, and also is poised to be a leader in digital distribution.

But as a matter of principle, what Amazon is doing, quite frankly, stinks. It also exposes one of the online retailer’s weaknesses and rare disadvantages to traditional brick-and-mortar retailers such as Walmart, Costco, Target and Best Buy.

To move huge quantities of discs, Amazon has to sell new releases at the same price as Walmart and the other physical retailers. But Walmart and crew can afford to lowball the price, even selling below their own costs, because they use discs as loss-leaders to drive traffic into their stores.

Amazon hasn’t yet figured out how to get those impulse sales in the digital world — but they have to be competitive, so now they are using their clout to beat up the studios in an attempt to get better margins.

My take, to Amazon: Stop being a bully and, instead, focus all of that misspent energy on figuring out how to snag impulse buyers online. Amazon’s efforts in that regard have been half-hearted and only moderately successful — otherwise, there’d be no squawking over price.

If Amazon could come up with a way to really captivate consumers and, say, through each Blu-ray Disc or DVD purchase, get them to buy a ton of other things, they'd rule the world.

But they’d have to match the disc sales price of Walmart and other brick-and-mortar retailers on their own, without any studio subsidy, even if it meant taking a loss — which, in reality, would be an investment. And Amazon just doesn’t want to do that.

It’s much easier, I suppose, to block studio product and try to get the studios to blink first.

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