Digital vs Physical

With Apple’s introduction of a movie download service, retailing heavy-weights Walmart, Target and Blockbuster are crying foul and have warned that they might “re-think their DVD retail strategy”. Walmart represents 40% of retail DVD sales and Target represents 15%.

Retailers like Target and Wal-Mart typically pay $17 or $18 wholesale for new-release DVDs. They typically sell them to the public at $16 to $19, often pricing them below cost to attract consumers into their stores. Retailers worry that consumers will quickly lose interest in DVDs if cheaper online versions of movies become widely available.

Four things come to mind to challenge their claims:
1. The retailers knowingly lose $1-2 on every DVD but make it up in volume? 🙂
2. Online movies via Bit torrent offering FREE movies has made customers quickly lose all interest in DVDs?
3. The quality of a downloaded movie from Apple is far superior in viewing quality (resolution) to a physical DVD? Especially for HD TV (Blueray)
4. Online music downloads have similarly significantly impacted CD sales?

I am not a big purchaser of DVDs. I own approximately 10-15 in total. I bought “O Brother, where art thou?” from Apple’s store to support the format. (I bought one of their games as well for the same reason). I would have NEVER purchased these as boxed DVDs, so I could argue that digital distribution is expanding the market for content, not cannibalizing DVD sales.

The WSJ states that downloads of “Lost” (I’m a season ticket owner) have not impacted DVDs sales at all, and they they remain top selling items, which takes a bit of the wind out of the retailers sails.

No one likes change. Change is good.

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