Comments on: Analyst: Redbox Should Make Deal with Walmart

By: David

David — Tue, 20 Oct 2009 03:03:36 +0000

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.”

By: Mark

Mark — Fri, 16 Oct 2009 13:38:07 +0000

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.

By: Mark

Mark — Fri, 16 Oct 2009 12:59:07 +0000

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.

By: Mark

Mark — Fri, 16 Oct 2009 12:51:53 +0000

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.

By: The

The — Fri, 16 Oct 2009 05:29:58 +0000

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)

By: milrtime83

milrtime83 — Thu, 15 Oct 2009 21:33:20 +0000

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

By: milrtime83

milrtime83 — Thu, 15 Oct 2009 21:31:21 +0000

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.

By: Robert

Robert — Thu, 15 Oct 2009 19:59:13 +0000

Well, my local Walmart Redbox is blue, maybe Walmart will call it BlueBox. Then we need a new site called insidebluebox.com.

hehe

By: John Small

John Small — Thu, 15 Oct 2009 18:06:27 +0000

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?

By: acdahl

acdahl — Thu, 15 Oct 2009 17:10:07 +0000

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.