Amazon and Disney lock horns over DVD pricing

Yahoo Finance

Embracing its recurring role as the hyper-capitalist antihero, Amazon.com (AMZN) is refusing to accept pre-orders for DVDs of a handful of Walt Disney (DIS) box-office smash hits, including “Captain America: The Winter Soldier” and “Maleficent,” as the online hypermarket presses for better payment terms.

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Amazon played a similar game of hardball earlier this year with Warner Brothers and, most notoriously, the e-commerce giant is waging a long-running contract fight with book publisher Hachette that has made prisoners of war of many best-selling authors.

So while this is a familiar story likely to be sorted out in a predictable way – with a meeting in the middle over DVD pricing and Disney’s cut – there are a few important differences between Disney’s jam-up with Amazon and Hachette’s.

Related: Amazon, Hachette ramp up mudslinging in book dispute

For one, Disney needs Amazon a lot less than Hachette or any book publisher does. Books are all the publishers sell and Amazon is by far the biggest distributor. For Disney, physical DVDs remain a nice business, but are in broad decline as streaming video takes over.

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Disney as a company makes most of its copious profits from its cable networks, then from theatrical films and their theme parks. Sure, this Amazon dispute could partly be about terms of trade for Disney movies over Amazon’s streaming service, but in that arena Amazon has less leverage.

Second, no kind of content might be less a pure commodity than a Disney film. Whether it's animated fairy tales like "Frozen,” Marvel superhero vehicles or wondrous Pixar productions, these are films people identify as Disney-branded films and want to see specifically, one way or another. The seven year old who wants a "Maleficent" DVD to watch ten times a week won’t be satisfied with some generic puppy-rescue movie from another studio.

One final thing: Unlike the old-guard New York publishing houses at a loss for how to navigate the digital media world, Disney is run by visionary CEO Bob Iger, who from the beginning has understood that great content needs to be offered in whatever form the public wants to consume it.

Related: How Disney became the most important company on earth

He’s done his best to make Disney agnostic as to how exactly it delivers its entertainment and information bounty. He sits on the board of Apple (AAPL). He made Disney a partner in Hulu, the ongoing experiment in on-demand digital TV. He gets that as long as his studios and networks create the best, most unique, most identifiably Disney content, people will happily pay for it in whatever form is available and easy.

Amazon’s abiding mission and relentless goal is “lower prices for everything” for its customers. It’s admirable, effective and, on balance, great for consumers and the economy.

This scrap with Disney will probably be settled without much customer inconvenience. But if not, if the tussle gets contentious, we might see the limits of Amazon’s ability to muscle around a company whose beloved proprietary products have a lot more value to customers than the latest beach novel.

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