Analyst Questions $10 New Release DVDs9 Nov, 2009 By: Erik Gruenwedel
Wal-Mart’s announcement that it would offer pre-order pricing on 10 major studio DVDs over the next couple of months to only $9.99 left Pali Capital analyst Richard Greenfield questioning the impact of the retail behemoth’s scorched earth policy on packaged media sellthrough.
Greenfield believes the initial influence on studios whose titles are among the 10 selected by Wal-Mart and other participating retailers will be positive as unit sales increase significantly, especially for box office hits Star Trek, Harry Potter and the Half-Blood Prince and Night at the Museum: Battle of the Smithsonian.
The analyst said the deep discounts, however, could negatively affect Walt Disney Studios Home Entertainment’s Up and DreamWorks Animation’s Monsters vs. Aliens, with both titles currently selling for $15.86 at Wal-Mart, including pre-orders for Up.
“Lowering price on standard definition DVDs to $9.99 will only make it harder for consumers to spend $15+ on new release DVDs in 2010, let alone spending double for Blu-ray [Disc titles],” Greenfield wrote in a note.
The analyst projects that consumer spending on DVDs will continue to decline in 2010, offset by increasing rental spending. Greenfield doubts Wal-Mart, Target, Amazon and others can afford to absorb the loss leader pricing into 2010.
“While one-off aggressive promotional pricing has occurred for years, what we find particularly concerning about this promotion is the breadth of titles included,” Greenfield wrote.