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Wal-Mart is a Battlefield

7 Jul, 2009 By: Thomas K. Arnold

The home video industry is at war with itself, and the bloodiest battlefield is the friendly neighborhood Wal-Mart store.
It's no secret that DVD sales are slumping, victims as much as anything else of the troubled economy. The first quarter ended with sales down 15% from the first quarter of 2008 and the second quarter, from the preliminary reports I've heard, wasn't much better. Of course, in this economy being down 15% is hardly a disaster, but even so studio executives can't help but grimace when they see reports that video rental, thanks to the mushroom-like proliferation of Redbox kiosks and the continued surge of Netflix, is holding steady and may even be trending upward.
The collapse of revenue-sharing deals means the studios no longer share in any of the spoils, so they are understandably edgy when they see sales go down while rentals go up. They can't help but feel that in this Great Recession we're in, people are looking for bargains, and renting a movie all of a sudden makes a lot more sense than it did in the old days when everyone was rolling in dough and the average consumer didn't think twice about picking up the latest new release at $15 a pop.
Nowhere is the spectre of cannibalization more vivid than in Wal-Mart stores, where Redbox kiosks are sprouting up in the entryways and, conventional wisdom holds, seducing consumers with the promise of dollar rentals before they can even walk into the store and browse the new release DVD sales section.
Pleas to Wal-Mart that the chain is only hurting itself seem to be falling on deaf ears, according to what I'm told. Apparently a completely different party controls the front of the store than the rest of the store, and as long as that party pays its way Wal-Mart management is not going to interfere--regardless of how this may affect the chain's regular retail business.
Now, you know damn well this is a bunch of hooey. If Wal-Mart seriously believed Redbox kiosks were cannibalizing their DVD sellthrough business, they'd shut them down in a heartbeat....unless they didn't care.
That's the only logical explanation, supported by Wal-Mart's conspicuous, and continued, lack of effort in merchandizing Blu-ray Disc. It's almost as though the chain, which made tons of money during DVD's boom years by using the category as a loss leader to drive traffic into its stores, has lost faith in packaged home entertainment.
Dumb move. Blu-ray has the potential to be every bit as big as DVD, and I am convinced that once the economy starts to recover it will quickly gather the steam it needs to really take off. And standard DVD, meanwhile, will be one of the first consumer products to bounce back.
Wal-Mart executives have been through this once before; home video was going through a similar slump in the late 1990s, before DVD came along. Back then, Wal-Mart took a gamble, got behind DVD in a big way and emerged a big winner.
Hasn't anyone over there heard of history repeating itself?
Either dump the kiosks or really step up DVD/Blu-ray Disc departments and storewide promotions. Let's put an end to this war that no one can win.


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