Apple and Wal-Mart: Antagonists or Allies?

Recent reports suggest that Apple and Wal-Mart are in talks to negotiate a partnership. The deal will have iTunes movie downloads available on Wal-Mart store shelves.

The arrangement may take the form of an iTunes Store "digital coupon" available for purchase at Wal-Mart. Customers would then use these coupons to download movies from the iTunes online store. (Source: arstechnica.com)

Such an arrangement would allow Wal-Mart to gain a foothold in the still young downloadable movie industry, while enabling Apple to increase their movie offerings to a wide audience.

The potential partnership comes as a shock, considering the reported tension between the two companies. The buzz in the industry is that many movie studios had shown great interest in signing a deal with the iTunes initiative -- but only under agreement that Apple would pay $14.50 to the studios for each downloadable movie.

Wal-mart, who currently pays $17 in royalties for each DVD movie sale, was not happy with Apple's recent deal and demanded similar terms. However, since DVDs cost more to produce than their intangible counterparts, Wal-Mart's terms were left unchanged.

Still unhappy with their agreement, Wal-Mart reportedly threatened to cut DVD orders from movie studios if they agreed to sign with Apple's iTunes. Although Wal-Mart denies these claims, Disney is currently the only studio to seal a deal with Apple. (Source: arstechnica.com)

With Disney already signed on to the iTunes arrangement, it is quite possible that other movie studios are waiting to see how things pan out before striking a deal themselves. Studio sources report that many major movie studios are close to signing on with Apple, but are holding off until the end of the fourth quarter (which accounts for half of all DVD sales throughout the year). (Source: macrumors.com)

The future is still very unclear with the Apple-Wal-Mart partnership. Although the two companies may strike at some point, Apple may find the alliance unnecessary if they are able to attract more movie studios on their own.