Amazon halts some Disney movie preorders


Amazon (NASDAQ:AMZN) has halted some preorders of Disney (NYSE:DIS) movies, such as Maleficent and Captain America: The Winter Soldier, in what appears to be yet another contract disagreement.

A similar tactic has been in use on the Hachette Book Group (OTCPK:LGDDF) for the past four months. Amazon has blocked customers' preorders and delayed shipments of the publisher due to a dispute over e-book pricing.

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Comments (27)
  • jpintoctr
    , contributor
    Comments (701) | Send Message
     
    If confirmed show this is un-acceptable way to conduct business and use it's position as major distributor to far. Eventually this kind of strategy will backfire, with vendors taking note an look to diversify to other outlets.
    11 Aug 2014, 03:19 AM Reply Like
  • sodajerk
    , contributor
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    If I were Disney, I would skip Amazon and let the brick and mortar stores with e commerce operations (Walmart, Costco, Target, Best Buy) fill the void. Amazon needs Disney more than Disney needs Amazon.
    11 Aug 2014, 07:07 AM Reply Like
  • User7766461
    , contributor
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    That is like saying Wal-Mart needs Disney more than Disney needs Wal-Mart, which is a bit of a stretch wouldn't you agree?

     

    I'm not even sure i would buy the statement that Wal-Mart's video department needs Disney more than Disney needs Wal-Mart's video department. Much less the total store.
    11 Aug 2014, 09:27 AM Reply Like
  • Minutemen
    , contributor
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    User77: The difference is that Wal-Mart is a profitable business. Amazon is not. Amazon is doing this in hopes of squeezing some juice out of a rock.
    11 Aug 2014, 09:39 AM Reply Like
  • User7766461
    , contributor
    Comments (158) | Send Message
     
    A difference in investment thesis between Wal-Mart and Amazon is that Wal-mart is a more profitable business. But that has absolutely nothing to do with the comparison i mention.

     

    Also, your metaphor doesn't make sense. If Disney were a "rock" as you put it, then you imply that Disney's profit margins are so slim that Amazon could not squeeze any further profits out of them. However, that is not the case.
    11 Aug 2014, 09:47 AM Reply Like
  • Minutemen
    , contributor
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    No, the issue is not Disney's margins, its Amazon's margins. Amazon wants to buy from Disney cheaper so that it can undercut price on box retailers and other online vendors.
    11 Aug 2014, 09:58 AM Reply Like
  • David at Imperial Beach
    , contributor
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    Well, Walmart would not have a very good video section if there were no Disney titles. As soon as people realized that, they would stop shopping for videos at Walmart. So yes: Walmart needs Disney, and Amazon needs Disney. Amazon needs Disney more because Amazon is trying to compete with Netflix and Walmart isn't. Amazon also needs Disney because most of its Premier customers consume lots of entertainment.

     

    If Amazon is to be a premier entertainment retailer, it needs Disney.
    11 Aug 2014, 02:05 PM Reply Like
  • User7766461
    , contributor
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    First off... How does Amazon compete with Netflix, but Walmart doesn't exactly, in this specific instance of course?

     

    Secondly, a customer searching for a specific title will likely find that title somewhere. I agree.

     

    "As soon as people realized that, they would stop shopping for videos at Walmart."

     

    I think you mean as soon as "Disney Customers" (which i would argue are not the majority, unless you contend that Disney holds 50% share in Video) realized that, and not "people" because not all customers care about Disney. If i never look for Disney titles, whether or not my store of choice carries them is irrelevant. I don't stop shopping because my niece cant find her DVD's at my store...

     

    Now, on who needs who more...

     

    A simple example... Let's say Wal-Mart is planning a DVD promotion, Wal-Mart can choose a Sony Pictures DVD or a Disney DVD to place on a rack near their check stands, an impulse items dream location... Lets also assume that the Disney title in question was twice as popular than the Sony Pictures new release, and that all sales off the rack are incremental to what they would sell off their regular shelf space. If Wal-Mart promotes the Sony Pictures DVD they will sell $20M from said rack, if they sell the Disney DVD they will sell $40M from that rack. If Wal-Mart chooses to promote Sony Pictures, they miss out on $20M in sales, however Disney misses out on $40M. Clearly it is in both Wal-Mart and Disney's best interest to cooperate, but who needs who more?

     

    This is the same dynamic that is happening at Amazon, although more extreme.

     

    I cant argue with your point that the average Amazon customer may care more about the availability of Disney DVD's than the average Wal-Mart customer, but claiming Amazon needs Disney more than Disney needs access to Amazon's 240M customers, without knowing the dynamics of Amazon's customer base is quite a stretch.

     

    As someone who deals with this dynamic regularly as a financial analyst for a brick and mortar retailer, I can tell you, with confidence, that you are giving Disney and other Suppliers by extension, far too much credit in their negotiating power.
    11 Aug 2014, 02:47 PM Reply Like
  • deaverb
    , contributor
    Comments (153) | Send Message
     
    Is this a rendition of Bill Cosby's line, "Eat one and the rest fall in line?" Or the old French Legion disciplinary thought, "Shoot one and the rest fall in line?" The problem of course is that this makes two now, Hachette and Disney. And Disney is a far more powerful brand though Hachette has a collection of good products. Who benefits? Barnes & Noble and Google partnership; Walmart.com; Staples.com; Costco.Com. Among others. Who loses? Other publishers who need Amazon, at least for as long as Amazon can sustain their approach. From a pure investment point of view I would think Barnes and Noble is the biggest winner, followed by Walmart who is coming on strong in dot com (as they have done historically in everything they have decided to focus upon such as back in the day the toy and juvenile products area and more recently in Canada and Mexico). Bertelsmann is private and a neutral. But the other New York publishers are vulnerable. This increases Amazon's enemy list, never a good thing, so makes Amazon itself more vulnerable.
    11 Aug 2014, 07:42 AM Reply Like
  • Minutemen
    , contributor
    Comments (2266) | Send Message
     
    Disney is in the driver's seat on this one. Amazon is trying to choke profits out of the vendors that feed them. Understandable given that Amazon operates at a loss, but they'd likely do better by cutting their lavish spending and focusing on running a profitable business.
    11 Aug 2014, 07:44 AM Reply Like
  • User7766461
    , contributor
    Comments (158) | Send Message
     
    "Disney is in the driver's seat on this one."

     

    I'm not sure they are... If anyone is in the driver's seat (the car being amazon's future policy in regards to Disney) it is Amazon and Amazon's customer base, and the question is can Amazon fight it's vendors so aggressively without alienating those customers.

     

    This same dynamic occurs every day in the retail business. Retailers constantly press their suppliers for lower cost of goods or higher incentives while said vendors argue for the value of their brand until a resolution is reached. The difference is that it rarely gets this level of media attention, which is due to the profiles/scales of both companies.
    11 Aug 2014, 11:06 AM Reply Like
  • Minutemen
    , contributor
    Comments (2266) | Send Message
     
    Sorry, but I don't see Disney giving into Amazon's demands on this. Disney has plenty of avenues to move its products. It does not need Amazon. This is a squarely a negative for Amazon. No effect on Disney.
    11 Aug 2014, 11:44 AM Reply Like
  • User7766461
    , contributor
    Comments (158) | Send Message
     
    I'm sorry, but i don't think you understand my comment. At no point did I opine or predict the result of the negotiations. My guess is there will be some compromise at some point.

     

    All I am saying is that if Amazon wants to put pressure on Disney, or other vendors in this way, that decision is purely their own. Just because Disney does not give in, does not mean that Amazon will, and vise versa, but future policy in regards to how Amazon treats Disney will be determined by Amazon, not Disney.

     

    I do agree that Disney has significant leverage in these negotiations. That said, claiming that Amazon dropping Disney new releases from Amazon.com will have "no effect on Disney" is outright silly. Sure, everyone who is searching specifically for "Captain America: Winter Soldier" will likely have no problem finding it somewhere, but what about all the would-be impulse purchasers of the DVD who may only purchase the title as they were browsing for something else on Amazon? What about consumers looking for a video in general and not for that specific title, say for a gift, and they plan on making that purchase on Amazon... Do you not think those customers will just pick up an alternative? Who is to say they wouldn't just pick up Spiderman 2 from Amazon for their hypothetical nephews birthday instead?

     

    This is not a zero sum game.

     

    I'm not disputing that Amazon will hurt as well, but your wild claim is like saying that if Kroger stopped selling kellogg's cereal it would have zero effect on Kellogg's, because there are plenty of other grocers that sell Kellogg's branded cereal. Sure, if I only eat rice crispies i will not have an issue finding them outside of a Kroger, but if i'm a loyal kroger shopper, and i just need a breakfast cereal, I will have no problem finding an alternative at Kroger.

     

    This is the power in the hands of the retailer. If the retailer/vendor power dynamic worked as you seem to suggest we would all be paying significantly more for goods, or all retailers would be broke.
    11 Aug 2014, 12:40 PM Reply Like
  • Minutemen
    , contributor
    Comments (2266) | Send Message
     
    "All I am saying is that if Amazon wants to put pressure on Disney, or other vendors in this way, that decision is purely their own."

     

    Of course it's Amazon's decision. No one is arguing that. The questions are, 1) is it a good business decision by Amazon and 2) will this decision significantly affect Disney's bottom line. Hint: the answers to both questions are, "No."

     

    See SA follow up to this news release: http://seekingalpha.co...

     

    From the referenced release:

     

    Media analysts are quick to note that Amazon's leverage isn't that great with all the streaming and retail options consumers have to pick up favorite titles.

     

    Disney's partnership with Hulu and cozy relationship with Apple make its Amazon distribution worries only a minor headache.
    11 Aug 2014, 12:56 PM Reply Like
  • User7766461
    , contributor
    Comments (158) | Send Message
     
    While i disagree, i appreciate your viewpoint. One thing I am sure we both can agree on is this will be entertaining to watch unfold. Happy Investing.
    11 Aug 2014, 01:02 PM Reply Like
  • Minutemen
    , contributor
    Comments (2266) | Send Message
     
    Yes, we will have to agree to disagree on this topic.

     

    Good luck!
    11 Aug 2014, 01:06 PM Reply Like
  • David at Imperial Beach
    , contributor
    Comments (4382) | Send Message
     
    The same dynamic does not occur every day in the retail business. Retailers do not normally pull titles off their shelves and tell the distributor that they refuse to carry them unless they lower the MSRP. Brick and mortar stores may decide that a slow moving, high priced title isn't generating enough profit and stop reordering it and fill the shelf space with lower priced titles, but that's a different dynamic. The retailer is not refusing to sell existing stock. The retailer is not concerned about controlling the final retail price the title sells to the consumer for. Instead, it is looking at its own profit and saying: this title does not generate enough profit at this volume and profit margin, and I can find a better use for that shelf space. Note that Amazon is not claiming that Disney titles don't move fast enough to generate a decent profit at current prices. Nor are they claiming that the titles got crowded off the shelves due to more popular lower priced titles.
    11 Aug 2014, 02:20 PM Reply Like
  • User7766461
    , contributor
    Comments (158) | Send Message
     
    I can tell you, from real experience, that in extreme cases, as in this case, brick and mortar retailers do indeed refuse to sell vendors' product if the vendor in question does not meet the requirements of that retailer. It is just rarely, if ever, this high profile.
    11 Aug 2014, 03:01 PM Reply Like
  • deaverb
    , contributor
    Comments (153) | Send Message
     
    Regarding Amazon itself, keep an eye out for Paulo Santos on the subject. The expert, in my opinion.
    11 Aug 2014, 07:49 AM Reply Like
  • Ebook Bargains UK
    , contributor
    Comments (69) | Send Message
     
    Jeff Bezos Writes letter To The World's Children As Disney Dispute Escalates.

     

    http://bit.ly/1oX7AbP
    11 Aug 2014, 10:23 AM Reply Like
  • investingInvestor
    , contributor
    Comments (2452) | Send Message
     
    EBU, you nail it for all SA readers to clearly see in the bright light. Once SA readers understand you are shilling for Hachette, they will be able to see how the different sides roll. Does EBU understand SA readers research their sources?

     

    Stage some guerrilla theatre, they do!
    11 Aug 2014, 10:42 AM Reply Like
  • Peter Larson
    , contributor
    Comments (642) | Send Message
     
    "Here at Amazon we firmly believe that if you repeat the same thing enough times people will start to believe it,"

     

    -Good show.
    11 Aug 2014, 12:53 PM Reply Like
  • thotdoc
    , contributor
    Comments (1958) | Send Message
     
    Let's see, I lead Amazon and I'm happy to be living inside my little world where my company loses more and more money in an effort to become the only retailer....the only retailer....which I know I can do when I can deliver today what is ordered today. Then, when I'm the only retailer I can raise my prices and finally make a profit.

     

    Other retailers are not my enemy...I can undercut them on price and maybe service. My enemy is companies who produce the goods I want to sell; they seem to want to make a profit.
    11 Aug 2014, 11:32 AM Reply Like
  • investingInvestor
    , contributor
    Comments (2452) | Send Message
     
    doc, you are a philanthropist? $200 textbooks, ebooks at the same price as pulp books, staggered distribution modes so to squeeze more profit, bundled cable packages, artificially slowed Internet connections, special deals locking out competitors and outsiders.

     

    Movie theaters charge $18. Give your money away if you want.

     

    The digital age is becoming a sea of tollbooths. The special interests see you and want your money.

     

    Amazon is simply and consistently stating with evidence to back these statements that the information industry could make MORE MONEY by reducing overly high prices and tearing down tollbooths.

     

    Years ago, Steve Jobs stated the same things about the music industry in order to launch the iPod line. Then, Steve Jobs stated the same things to justify removing onerous and broken DRM from downloaded music. Easy peasy!

     

    Jeez! The whole history is right in front of you. Today, Amazon is doing for books what Steve Jobs already did last decade for digital music and video.

     

    Be alert to all the industry distortions and theatre meant to block Amazon.
    11 Aug 2014, 11:52 AM Reply Like
  • danksmith
    , contributor
    Comment (1) | Send Message
     
    Surely there is a Disney.com or equivalent where DVD orders can be placed? Disney can ship their own DVD's from their own warehouse. Taking the 800 lb. Amazon gorilla out of the middle makes it that much more profitable for Disney.
    11 Aug 2014, 12:22 PM Reply Like
  • investingInvestor
    , contributor
    Comments (2452) | Send Message
     
    This is a Wall Street Journal story. The WSJ is NOT a credible source. Wait until there are independent verifiable sources.
    11 Aug 2014, 01:21 PM Reply Like
  • User7766461
    , contributor
    Comments (158) | Send Message
     
    Dank, I think you are overlooking the value of selling a product on the virtual shelves of a website with around 250M active users.

     

    A Disney.com will only sell DVD's to customers looking for Disney DVD's, while Amazon.com can sell Disney DVD's to customers looking for movies in general or even competing titles as well as customers who came looking for Disney DVDs and in some cases sell DVD's to customers who were not even initially shopping for DVDs.

     

    If things were as easy as you suggest, amazon would have zero product to sell, aside from fire phones and tablets.

     

    People treat Amazon as if it is so different from a brick and mortar retailer. If it was Wal-Mart blocking Disney new releases from their brick and mortar stores would you claim Disney should just remove the 800 lb. Wal-Mart gorilla from the equation and find alternate avenues for selling product in that situation as well? Because it is virtually the same thing, however it seems that the average investor seems to think Amazon holds no cards here...
    11 Aug 2014, 01:52 PM Reply Like
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