By Greg Bensinger
When Amazon.com Inc. wants to fight, it turns to a familiar
playbook.
The latest to feel the Seattle retailer's sting is Walt Disney
Co. Amazon isn't accepting pre-orders of forthcoming Disney DVD and
Blu-ray titles including "Captain America: The Winter Soldier" and
"Maleficent."
It is the same tactic Amazon has employed in a bitter four-month
spat with Hachette Book Group over e-book pricing. To press its
point, Amazon suspended pre-orders for physical copies of many
Hachette titles and lengthened shipping times or pared discounts
for others.
The tactics underscore Amazon's unusual sway in e-commerce,
where it is by far the dominant player, particularly for books and
media.
"It's rare in physical retail to have contract disputes become
so public. Most retailers just aren't willing to hurt themselves by
cutting off sales," said Sucharita Mulpuru, a Forrester Research
analyst. "Amazon has demonstrated that they're not going to be the
one to blink in these negotiations."
At the same time, Amazon may feel pressure to improve its
profitability after a disappointing second quarter wounded its
stock last month. The company reported a wider-than-expected loss
of $126 million despite a 23% jump in revenue. It projected an
operating loss of as much as $810 million in the current
period.
While other sites, like those run by Barnes & Noble Inc. and
Wal-Mart Stores Inc., are still offering pre-orders of the Disney
titles, Amazon customers are told they will be notified when the
discs become available.
It isn't clear what the dispute is about, and Disney and Amazon
declined to comment.
Amazon isn't the only company with which Disney's home
entertainment unit finds itself at loggerheads. Since June of 2012,
the studio behind the wildly popular movie "Frozen" has been unable
to strike a deal with Outerwall Inc.'s Redbox due to a disagreement
over how long consumers should have to wait to rent DVDs from the
kiosks. Disney wants a 28-day delay from the time DVDs go on sale,
the same terms as three other major studios. Redbox has refused,
contending that Disney's family movies are uniquely valuable to its
audience. For the past two years, Redbox has bought Disney movie
discs directly from retailers and other suppliers and neither
company has budged.
Amazon, meanwhile, briefly cut off pre-orders of physical
versions of movies from Time Warner Inc.'s Warner Bros. studio
earlier this year before reaching an accord. That dispute had
involved not just pricing, but cooperative marketing, search
placement and other issues. During contract talks several years
ago, Amazon halted customers' ability to buy books from publisher
Macmillan.
Amazon has become an increasingly vital outlet for book
publishers and movie distributors as Tower Records, Virgin
Megastores and Borders, among others, have closed. Many retailers
offer only the most recent titles in their stores.
Limiting pre-orders of forthcoming titles can suppress sales,
affect best-seller lists and send customers looking elsewhere. Some
online retailers sought to capitalize on the spat, offering
discounted Hachette books earlier this summer.
The feud with Hachette, a unit of Lagardère SCA, intensified
over the weekend when Amazon called on its customers and
self-published authors to write directly to Hachette Chief
Executive Michael Pietsch.
"E-books can and should be less expensive," Amazon said in a
letter it posted to a new website, readersunited.com, early
Saturday. "Hachette spent three months stonewalling and only
grudgingly began to even acknowledge our concerns when we took
action to reduce sales of their titles."
Hachette has resisted Amazon's calls to set most e-book prices
at $9.99, rather than $12.99 or $14.99. Amazon, which controls more
than 60% of the e-book market, has said that the lower prices would
drive more sales and increase Hachette's and other publishers'
revenue.
Hachette on Sunday said Amazon is motivated by profits and
market share in the contentious contract talks. "Amazon is seeking
a lot more profit and even more market share at the expense of
authors, bricks and mortar bookstores, and ourselves," Mr. Pietsch
said. "We call on Amazon to withdraw the sanctions."
The publisher said Amazon's preferred price for e-books of $9.99
doesn't reflect the costs of producing titles, including marketing,
royalties and other expenses. More than 80% of Hachette's e-books
are already $9.99, Hachette said.
Amazon has said e-books represent just 1% of Lagardère's
revenue, meaning the French company could agree to its demands with
little impact.
Saturday's letter came after a group of about 900 authors last
month signed a petition--which ran as an ad across two pages Sunday
in the New York Times--protesting Amazon's tactics. The petition,
which urged readers to write to Amazon CEO Jeff Bezos, was signed
by some well-known authors, including Stephen King, Paul Auster and
Jennifer Egan.
The outcome of the Hachette dispute could have far-reaching
implications for other publishers, which are expected to enter
contract talks with Amazon later this year. Amazon has said it is
willing to suffer some damage to its reputation to do what it feels
is best for customers.
The Hachette and Disney standoffs "should be a golden
opportunity for retailers to take back market share from Amazon
they have lost," said Forrester's Ms. Mulpuru.
Ben Fritz contributed to this article.
Write to Greg Bensinger at greg.bensinger@wsj.com
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