How Wal-mart will shape the cost of downloadable films in England

A good example of how Wal-mart's size and power affects everyone - and not just in the US.

I've talked about Wal-Mart's near-monopsony powers, and why the perfectly rational and understandable decisions of the company may not, in fact, be in the wider interests of the country. Today, in The Wall Street Journal, there's a concrete example of they use the powers:

Recently, for example, the major studios opened negotiations to provide movies to be played on Apple Computer Inc.'s video iPod -- an important step toward Hollywood's digital future. Then Wal-Mart, the biggest seller of DVDs, disrupted the talks when it delivered a pointed warning to the studios not to give Apple a better deal for digital movies than the retailer gets for physical copies.

That, of course, is ridiculous. A physical digital video disc must be produced, printed, labeled, packaged, shipped, affixed with bar codes and pricing information, and shrink-wrapped before being sold. This must be done for every single copy. To demand that a download of the actual data -- which requires none of the production, packaging, or delivery costs -- should be priced similarly is nuts.

Yet Wal-Mart will likely get their way on this one. They account for more than a third of total DVD sales in the country. Without their cooperation, the movie studios are screwed. And so they'll raise the price on iTunes downloads to retain the retailer's favor.