Wal-Mart sees download upside

Mega-retailer makes deal for Warner's 'Superman'

Wal-Mart dipped a big toe into the download market Tuesday with a deal to sell downloads of “Superman Returns” along with the DVD.

In an exclusive pact with Warner Bros., the world’s largest retailer started bundling DVDs of “Superman Returns” with a coupon allowing customers to download the film from Wal-Mart’s Web site for a nominal fee.

Deal allows Wal-Mart customers to download the film for use on portable devices for $1.95, computers for $2.95 or both for $3.95, in addition to the cost of the DVD, which retails in Wal-Mart stores for $14.87.

The retailing behemoth, which accounts for 40% of DVD sales, said it hopes to expand the pricing model to other titles — a move that could disrupt the pricing model established by Apple’s iTunes and Disney.

Deal marks Wal-Mart’s attempt to convert its enormous walk-in DVD customer base into one that also pays the company for the right to download films. It comes as Wal-Mart ramps up its own video download service, which “will feature both movie and television content from a number of top studios and TV networks,” the company said.

While the deal undercuts Apple’s pricing for those who buy both the DVD and a download, analysts were skeptical as to its appeal. Downloads cannot be played on Apple’s iPod, which accounts for 80% of the handheld market, while most laptops and PCs, as well as many cars, have DVD players, allowing portability without a download.

Warner Bros., which has not done a download deal with Apple’s iTunes, shopped the idea to other retailers as well as Wal-Mart.

Warner Homevid prexy Kevin Tsujihara said the deal “plays to the strengths of Wal-Mart’s DVD business while breaking new ground in the nascent digital video download market.”

The studios are looking for allies outside Apple to avoid ending up like the music industry, which tried restrictive download schemes only to have Apple steal the retail market and dictate pricing.

“The studios are saying, ‘Let’s try everything with everybody and learn how customers respond,’ ” said Russ Crupick, home entertainment analyst with NPD Group.

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