Eric Wold, a financial analyist with San Francisco-based Merriman Curhan Ford, has previously stated that he likes Redbox’s short- and long-term chances in its legal battle against several major studios.
In a recent note to investors, Wold proposed the idea that Redbox could work out an arrangement with a major retailer such as Walmart, Best Buy or Target to acquire Warner, Fox and Universal titles in large quantities. The hypothetical deal would allow Redbox to get better pricing than it currently receives from other third-party resellers it obtains delayed-release titles from.
Wold suggested that retailers would discover that bulk sales to Redbox could be “quite valuable”. He also recommended Walmart as an ideal candidate, as the world’s largest retailer accounts for an enormous percentage of DVD sales and already has Redbox kiosks at many of its locations.
Despite likely Hollywood objections to any such deal, Wold believes that studio outrage would have little effect:
“However, given that some retailer chains actually dominate a significant portion of the DVD sell-through market, we believe the power would quickly shift to the retailer.”
It’s a fascinating idea, but that is all it remains for now: an idea. Also, it is unclear what effect Walmart’s recent announcement that it is reducing its in-store square footage for DVDs would have on its willingness to participate in such a deal. A hot new idea, or just hot air?
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Let us know what you think of Wold’s proposal in the comments.
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[via CNBC and Contact Music]
I think it is a fantastic idea! Walmart usually has the lowest prices on new release DVDs anyhow, so this would be beneficial to RB.
walmart has an extremely good relationships with the studios along with Best Buy and Target. They are not about to sacrafice that for redbox.
You have it backwards. It is the studios who don’t want to lose the relationship. Walmart sells around 30% of all dvd’s:
http://online.wsj.com/article_email/SB125470337132563199-lMyQjAxMDI5NTA0NTcwMDUzWj.html
The studios don’t have much power when they risk losing a 3rd of their dvd sales.
Also, with Walmart cutting back on their dvd displays it show that dvd sales aren’t as important to them as some people think and there isn’t much the studios could do if Walmart made a deal with Redbox.
edit: this is the correct link for the 30% statistic: http://www.getthebigpicture.net/blog/2009/10/5/wal-mart-eliminating-in-store-dvd-blu-ray-displays.html
Oh this could get really messy.
The studios could give better deals to the Targets and Best Buys of the world and say, “Screw you Wally, here’s your new cost for the movies, take it or leave it.”
I’d be buying my movies from whomever is not selling to Redbox if you want the lowest price for purchase.
There is no way that would happen, Walmart is way more valuable to the studios than vice versa. Walmart always calls the shots with all of their suppliers since they provide the most exposure to their products than any other retailer.
Is that why there are exclusives with certain titles at Best Buy and Target sometimes? I think that is proof that Wally doesn’t call the shots, they are powerful but don’t hold all the cards. I think a price increase would happen 100% if they signed a deal.
I don’t think the studios would have the cahones to tell Walmart “take it or leave it.”
Now it would make sense for a deal in the works where if you rent a RedBox movie you get a credit towards purchasing that movie at a given retailer that it has partnered with. That way it encourages the purchase of movies (what the studios want) and it drives traffic to a redbox partner.
I don’t know about the rest of you, but I have been buying much fewer movies lately because most of them are garbage. Even the best of recent movies are hardly worth owning. I refuse to buy a movie without screening it first. $1 rentals from RedBox FTW!
If Wally signs a deal with RB to distribute you don’t think that the studios will at least raise the price they are currently charging? Seriously?
Nope, absolutely not.
Walmart will dictate the price like they do with every other product they sale and the studios will take what they can get, especially since DVD sales are down.
Wal-Mart is already demphasizing (a bit) their merchandizing of DVDs. Raising the price could push WM to demphasize them further. Wouldn’t that be bad for the studios?
Also, pricing decisions are always a balance between selling the largest volume and receiving the highest price. Raising the price inevitably lowers the volume. Do the studios want that? You would think not, though their excessive blame of their ills on Redbox shows they don’t always think completely clearly.
You guys act like wally really cares about red box. First they have no minimum deal with red box they can tell them to leave at any time in all there stores. Second walmart is in month 4 of a 1 year test of their own machines that if it is sucessfull they will be removing all the red box machines from their stores and deploy their own. Red box means no more to walmart then the other vending machines coinstar has put in the front of the stores like the little stuffed animal machines it’s a widget to them. The studios on the other hand represent a hell of alot more money to them.
Walmart cares about nothing, other than the bottom line. You are correct. They are a bully to every vendor they have and don’t budge. They won’t care if someone pulls their movies out of WalMart and does a direct with Best Buy or anyone else. They know that they will still drive the lion’s share of almost every product out there. And they know most people will come buy it at Walmart.
Why do you think they are decreasing their DVD offerings? Because the market has already indicated that it is dropping off and Walmart is on top of it.
I really despise the company, but I give them credit for being extremely savvy and shrewd in their business decisions.
Does the analyst know that Wal-Mart uses new releases as a loss leader?
Why would they want to sell to Redbox at a loss?
That’s actually a good question.
My assumption is that if such a deal happened the price would be higher than actually walking into Wal-Mart and buying off the shelves, WM would cover their cost. Redbox would pay a bit higher price but would not have to send their people into the stores to buy cases of DVDs so that would make up in part for the higher cost.
The most likely scenario for such a deal would seem to be if Wal-Mart makes noises about prohibiting Redbox from buying from them at retail.
Here’s another possible reason I just thought of, that they would actually be willing to sell to Redbox at a loss.
The reason DVD sales are used as a loss-leader by Wal-Mart is they generate traffic to the store. As Redbox gets more popular they may be generating traffic which is worth more to WM than the loss they take on the DVDs. Hypothetically if WM takes the loss on the sale of 10 DVDs to the public they have gained 10 customers that day. But if they sell those 10 DVDs to Redbox then they have gained 10 customers a day for several days, resulting in a lower cost to Wal-Mart.
Now, does it really work this way? Are the sales of other merchandise by a Redbox customer comparable to those of a DVD buyer? Don’t know, only WM does. But the fact WM has Redbox machines at all says this might be true.
Well, my local Walmart Redbox is blue, maybe Walmart will call it BlueBox. Then we need a new site called insidebluebox.com.
hehe
I just registered that domain. 2 minutes later I got a certified letter from the telephone company telling me to cease and desist making blue box calls!
(just kidding of course)
This is a very serious decision to make. I would take plenty of time reading all sorts of fine print no matter who it may be. Personally I avoid going to the dumpster (wal-mart) as much as possible. So much for dictating companies as monopolizing as junk-mart. They hurt too many people in the name of their ‘lowest prices’. Our saving a buck isn’t worth it. REDBOX is absolutely wonderful. Working with wal-mart will give a portion of control to them. If not at first, they’ll weasel their way in. Acdahl has it right. wal-mart cares for wal-mart, nothing or no one else. …………By the way, my feelings for wal-mart stems from a major conference wal-mart held. They expressed without ANY concern for anyone in hearing distance that “We WANT to crush the little guys, we make them expendable. Their is no need for mom and pop shops. Everyone will have to adapt.”