Disney-Amazon Dispute

[BrokenDreams23]

Disney-Amazon Dispute Concerns More Than Pricing Studio, E-Commerce Giant Also Wrangling Over DVD Promotional Costs

 

Price isn't the only issue keeping "Maleficent" and "Captain America" off of Amazon.com Inc. AMZN +0.13% 's virtual shelves.

 

Walt Disney Co. DIS -0.46% 's dispute with the giant online retailer also encompasses promotion and product placement on the Amazon website, as well as questions over who makes up the difference when Amazon loses money to match the prices of competitors, said a person with knowledge of the matter.

 

While the companies are at loggerheads, Amazon has stopped taking preorders for DVDs and Blu-ray discs of Disney movies including "Captain America: The Winter Soldier" and "Muppets Most Wanted."

 

Sales of previously released Disney movies, as well as the company's many toys, books and other products, haven't been affected.

 

The issues at stake are similar to ones that came up during a contentious spring contract renewal between Time Warner Inc. TWX -0.59% 's Warner Bros. and Amazon, according to people familiar with the negotiations.

 

A particular concern of Amazon, those people noted, is that Wal-Mart Stores Inc., WMT -0.20% Best Buy Co. BBY -1.21% and other brick-and-mortar retailers sometimes charge less than the wholesale price for a new disc to lure people into stores so that they will purchase other, more profitable items. Amazon often tries to match those prices, but doesn't reap the benefits of drawing customers into a physical showroom.

 

As a result, the online retailer has asked studios to help make up for losses in those situations, the people said.

 

Amazon has engaged in tough negotiations with Hollywood studios in the past, but until the Warner Bros. dust-up, it doesn't appear to have previously impeded consumers' ability to preorder discs.

 

The online retail giant may feel increased pressure to improve profitability after a second quarter financial miss sent its stock lower in July. The company reported a wider-than-expected loss of $126 million despite a 23% jump in revenue. And Amazon indicated more red ink may be coming, forecasting an operating loss of as much as $810 million in the current quarter.

 

Amazon's dispute with Warner Bros. was resolved after several weeks. It isn't clear how long the fight with Disney will last, but both companies have shown a willingness to stand their ground in industry conflicts.

 

A current dispute between Amazon and Lagardère MMB.FR +1.69% SCA's Hachette Book Group has dragged on for four months. Amazon wants Hachette to set most e-book prices at $9.99, arguing the lower price will drive more sales and revenue for the publishing industry. The retailer is expected to negotiate with other publishers later this year over e-book pricing.

 

Since June of 2012, Disney, the studio behind the wildly popular movie "Frozen," has been unable to strike a deal with Outerwall Inc. OUTR +1.63% 's Redbox due to a disagreement over how long consumers should have to wait to rent DVDs from the company's kiosks. Disney wants a 28-day delay from the time DVDs go on sale, the same terms as three other major studios—a policy the studios believe encourages some consumers to choose more profitable purchases over $1.20 per night rentals.

 

Redbox has refused, contending that Disney's family movies are uniquely valuable to its audience. For the past two years, Redbox has bought Disney movie discs directly from retailers and other suppliers and neither company has budged.

 

Source: http://online.wsj.com/articles/disney-amazon-dispute-concerns-more-than-pricing-1407798288