Target warns Hollywood over Download Pricing

Filed in archive Business Trends on October 9, 2006

When Hollywood sells a movie through download, it charges the Internet site a few dollars less than it does for a seller of DVD's. For example, when iTunes sells a Disney movie online, it costs Apple $12.99 for the movie. Target selling the same movie will be charged $17 or $18 wholesale for new-release DVDs.

Target, which accounts for about 15% of the big studios' DVD sales in the U.S., appears to have had enough. It sent to the major movie studios a letter saying, in effect, that it didn't object to competition but wanted "a level playing field." The letter followed similar complaints from Wal-Mart Stores Inc who has 40% of the U.S. DVD market.

Target President Gregg Steinhafel said that the chain had become aware that "some movie studios have made new-release movies available to download service providers at lower cost" than DVDs, allowing the downloaded movies to be sold to the public at lower prices.

The studios are quick to point out that (1) DVDs are more costly to produce, distribute, and support; and (2) that movie downloads like iTunes also lead to more iPod sales that benefit retailers.

If you click here or on the picture above, you can see a CNBC business report on this topic.