Wal-Mart Says Not Trying to Fight Movie Downloads

By Gina Keating

Wal-Mart Stores Inc. disputed a report on Friday saying it was trying to dissuade movie studios from working with other forms of distribution, such as Apple Computer Inc.'s iTunes.

The New York Post reported that the world's largest retailer had warned Hollywood it may retaliate against studios for selling movies on iTunes amid concerns that Wal-Mart's DVD sales will suffer.

Shares of Apple and Walt Disney Co., which this month became the first Hollywood studio to offer full-length movies on iTunes, both fell more than 2 percent on Friday.

Some analysts, though, questioned whether concerns about Wal-Mart were the main contributor to the share price declines. Sanders Morris Harris analyst David Miller said Disney more likely dropped in reaction to fears of an economic slowdown, along with the broader market.

Wal-Mart disputed the Post report and said it was not pressuring movie studios into shunning online delivery.

"Customers want to watch movies and they want to be able to make the choice when and how they want to view them," a Wal-Mart spokeswoman said.

"While we recognize there are various current and potential providers of this service, we are not dissuading studios from conducting business with other providers."

Apple and Disney announced plans this month to sell movie downloads on iTunes. Disney Chief Executive Robert Iger said on Tuesday the company sold 125,000 downloads, worth $1 million in revenue, from iTunes in the offering's first week.

A Disney spokeswoman said she was not familiar with the claims in the Post report. An Apple spokesman could not be reached for comment.

A source familiar with the situation said while big retailers like Wal-Mart "freaked out" earlier in the year when Disney and other studios began selling TV shows on iTunes and other Web-based platforms, they showed no particular concern when Disney became the first studio to offer movies on iTunes.

The source, who declined to be identified, said the discount retailer learned over the intervening months that customers who download -- primarily young, single males -- are not the same as those customers who buy DVDs.

"I don't think Wal-Mart or Target or any of the big box retailers are nervous," the source said, "because we have had almost a year of learning and development, and it has proven not to be that threatening."

Iger has repeatedly said digital content delivery platforms such as iTunes have not cut into DVD retail sales or TV viewership.

Disney shares fell 2 percent to $30.08 on Friday on the New York Stock Exchange. Apple shed 2.2 percent to $73 on Nasdaq. Wal-Mart shares eased

0.4 percent at $48.29 on the NYSE.

(With additional reporting by Nicole Maestri in New York)

Copyright 2006 Reuters Limited.

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