E-commerce giant Amazon.com Inc.’s (AMZN) online pricing war continues. After media giants Hachette and Time Warner Inc's (TWX) Warner Brothers, it is Walt Disney Company’s (DIS) turn to feel the heat. Amazon has withheld DVD pre-orders of Disney's smash hit movies including Captain America: The Winter Soldier and Maleficent, repeating its tactics to extract better pricing terms. Neither party was available for comment.
The sale of movies and DVDs generate only a small part of Amazon’s revenues as compared to stores like Wal-Mart and Best Buy (BBY), which at times price new launches below their retail cost to attract customers.
On the other hand, for studios, DVDs and Blu-ray versions of their movies help generate a significant amount of profit because very few movies attain profitability in theaters. Given Amazon’s clout in the home entertainment market, it tactfully uses its dominance by putting pressure on vendors. In this case also Amazon appears to have an edge over the Hollywood studio.
Amazon has in the past withheld sales of certain products as a part of its strategy to gain leverage in negotiations with content providers. It has previously applied such bargaining tactics against Hachette Book Group by pulling out consumers’ pre-orders for books and postponing shipments of the publisher.
Amazon is facing criticism from authors and other insiders in the publishing industry, who allege that the e-commerce giant is exploiting its position as a major retailer to extract better pricing terms from its suppliers.
While the pricing disagreement between Amazon and Warner Bros. did not last long, the disputes with Hachette and Disney will likely continue.
The e-tailer is under a certain amount of pressure from investors who are increasingly unimpressed with its huge investments that continue to yield low returns because of its aggressive pricing strategies.
Amazon currently holds a Zacks Rank #4 (Sell).