Wal-Mart Scales Back DVD Displays

Wal-Mart Scales Back DVD Displays


Article from Wall Street Journal

A recent shift in merchandising strategy by the world’s largest retailer spells more trouble for DVD sales and the entertainment industry that depends on them for profits.

As part of a larger effort to clean up its aisles and appeal to higher-end shoppers, Wal-Mart Stores Inc. is doing away with display cases to promote the latest hot movie titles.

The move comes as major film studios are reeling from declines in revenue from DVD sales as cash-strapped consumers turn to low-cost rental services and digital downloads for home movies.

“We think the new strategy implies Wal-Mart no longer sees DVDs and Blu-ray discs as traffic drivers,” J.P. Morgan analyst Imran Khan said.

Studio chiefs dispute that conclusion, noting the importance of DVDs as a sales category for Wal-Mart, but none would speak publicly for this story.

Wal-Mart, which accounts for nearly a third of DVD retail sales in the U.S., didn’t respond to inquiries for comment.

The change to its DVD selling strategy is part of a larger merchandising overhaul the company calls “Project Impact,” in which it has been devoting more shelf space to top-selling products and cutting back on items that linger. The discount giant also is trying to spruce up its image and cut back on clutter in its aisles, like corrugated displays for DVDs, in hopes that it can attract a more upscale shopper.

As for DVDs, the Digital Entertainment Group estimates that overall U.S. retail sales fell 13.5% to $5.4 billion during the first half of 2009. At the same time, DVD rentals rose by 8.3% to $3.4 billion. Digital sales and rentals from services like Amazon.com Inc. and Apple Inc.’s iTunes rose 21% to $968 million.

Video on-demand revenue from pay-TV service providers, like Comcast Corp., is also rising. Comcast spokeswoman Jennifer Khoury says the company served 368 million total views on its VOD platform in July, up 11% from last year.

Meanwhile, studios have cut deals with services like Netflix Inc., the mail-order DVD rental service.

Meanwhile, Wal-Mart and other major retailers, along with several fast-food chains, have been adding low-cost DVD rental kiosks near store entrances provided by Redbox Automated Retail LLC, a division of Coinstar Inc.

Redbox’s prominent placement and its overnight rental price of $1 are viewed by film studio chiefs as a threat to sales. Three major studios — News Corp.‘s 20th Century Fox, Time Warner Inc.’s Warner Brothers and General Electric Co.’s Universal Pictures — are locked in a legal battle with the company and refuse to make their new titles available to Redbox until 28 days after their release. News Corp. owns The Wall Street Journal.

Starting with just 12 kiosks in 2004, Redbox is now expected to have 22,000 machines across the country by year-end.

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