The recent, much-publicized moves by retail giant Walmart and other retailers to limit quantities on new release DVD purchases may or may not be the products of collusion with studios, but could definitely be in the stores’ best interests. So says Pali Equity Research analyst Richard Greenfield in a recent Home Media Magazine piece. The article also suggests that the recent suspension of operations by kiosk operator e-Play was at least in part caused by Walmart’s ejection of the kiosks from their test locations.
Here’s what Greenfield had to say about the possible reasoning behind the new quantity restrictions, using Walmart as a specific case:
“We believe Wal-Mart has facilitated Redbox’s workaround efforts over the past year mainly due to the return store traffic. . . Initially, those benefits to Wal-Mart far outweighed the cannibalization Redbox was having on Wal-Mart’s retail DVD sales at the back of the store. However, as Redbox grew exponentially as a consumer brand and with consumers learning that they could rent from one Redbox in a Wal-Mart but return to another location (where they do not even need to go into a store, such as a 7-Eleven with the Redbox sitting outside), cannibalization has grown and the return-trip benefit is slowing.”
Thus, says Greenfield, it is in Walmart’s and other retailers’ best interests to do what they can to limit the competition that a rental kiosk in front of their locations gives to their DVD sales business.
Greenfield’s theory is an interesting one and one that has been tossed around before. Over to you, Insiders. Do you still suspect studio involvement in the quantity limit policies that have been put in place recently, or are they just good business moves by retailers trying to preserve a revenue stream?
(via Home Media Magazine)