Retailers pressure studios over downloads

LOS ANGELES -- National retailers that control the lucrative DVD market are pressuring Hollywood studios to give them the same favorable deals being offered to Web-based download services such as Apple Computer Inc.'s iTunes.

The latest expression of concern from retailers was a letter sent to studios by the president of Target Corp.

The letter warned that Target might have to reconsider the amount of shelf space allocated for movies if studios undercut the wholesale price of DVDs by giving online services a better deal on digital offerings, said a studio executive who saw the letter but asked to remain anonymous because he was not authorized to publicly discuss its contents.

Similar concerns have been expressed by Wal-Mart Stores Inc. and other retailers.

``Clearly there is some concern that there is some erosion by downloading," said Judith McCourt, market research director at Home Media Retailing.

Target declined to provide a copy of the letter sent last month. In a prepared statement yesterday, it called for ``equity between the alternative means of delivering movies to consumers."

At issue is the low price some studios charge for films downloaded through such fledgling services as MovieLink, CinemaNow, and Amazon.com's recently launched Unbox video store.

Retailers have been talking to studios for a year about such concerns.

The issue came to a head with the decision last month by Walt Disney Co. to sell digital downloads through Apple Computer Inc.'s iTunes store at a price that allows Apple to retail new releases for as low as $12.99.

Disney is the only studio selling films on iTunes, and that could be the case for a while as other studios balk at Apple's inflexible pricing model and try to placate worried retailers.

Online movie download services now account for less than 10 percent of movie sales, hardly a threat to retailers.

But retailers fear a shift in the future, when downloaded movies can be viewed on TVs as well as computer screens.