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Chapter 478 Everyone's Fallen into the Trap

Walmart learned of Amazon's price adjustments in the imaging products sector the very next day.

At Walmart's headquarters in Bentonville, Arkansas, Robert Davis and David Glass gathered early in the morning in the CEO's office on the top floor.

Davis took a data report, glanced at it, and handed it to Glass. "Amazon also updated its prices early this morning. Now their image products are priced the same as ours, but they're giving away extra perks like posters. Our online order volume has dropped by 13% in the past three hours, and the downward trend continues."

The person in charge of Walmart's online business had bloodshot eyes and a slightly wrinkled shirt. Although he had tried to straighten it, he still looked exhausted, probably because he hadn't been home all night.

Glass took the data report and focused intently on the data graphs. Walmart's order volume showed a clear downward trend after 5 a.m.

A moment later, Glass looked up at Davis and asked, "How effective was our price-cutting strategy last night, before Amazon adjusted its prices?"

"We officially launched the significant price reduction strategy at 8 pm last night. Judging from the results, within eight hours after the price reduction, our online store experienced explosive growth in visits, exceeding 300,000 visits, which is nearly 230% higher than the same period on weekdays."

"At the same time, the peak number of concurrent users also exceeded 6, setting a new record for the highest number of concurrent users in a single day."

"In terms of sales, the DVDs and VHS tapes of Titanic and Star Wars are selling the best. I have notified the purchasing department and asked them to immediately place additional orders for these two products. Based on the current inventory and sales speed, if we cannot replenish the stock in time, the inventory of these two products will not last until tomorrow."

"It's really popular," Glass couldn't help but remark after hearing the report.

Davis frowned and asked, "You mean Titanic?"

Although Walmart has achieved good results, it is far from being a hit, and Glass is definitely not referring to the mall business.

"Of course," Davis nodded in agreement. "It's been 15 months since this movie was released, hasn't it? Its money-making ability is truly astonishing."

Davis shared the sentiment. He recalled seeing news about the giant ship in the media not long ago. Some media analysts believed that the box office, videotapes, film and television licenses, game adaptations, and merchandise of "Titanic" could generate at least $50 billion in economic benefits, a feat unprecedented in Hollywood film history.

Beyond the jaw-dropping economic figures, there's a lot of speculation surrounding "Titanic" director Cameron Anthony.

Currently, the entire Hollywood is watching Cameron's next move.

Reports indicate that MGM has been in frequent contact with Cameron, and 20th Century Fox, the studio that nurtured Cameron and was also the original financier and producer of "Titanic," which suffered a major setback and became a laughing stock in Hollywood, has also not given up on contacting the great director.

It is said that 20th Century Fox offered Cameron extremely generous terms for cooperation, promising to provide full investment support regardless of the type of film he planned to make in the future, with no investment cap.

But what Davis admired most was that this great director actually chose to take a break.

At this point, no matter who he chose, he would offend the other side. He directly stated that he wanted to take a few years off to spend time with his family, thus distancing himself from the matter.

This ability to know when to advance and when to retreat is especially rare in the fiercely competitive world of Hollywood.

Sometimes, making appropriate concessions is not a sign of compromise or helplessness, but rather a wiser choice.

"Do you have any ideas about MGM?" Speaking of this movie, Davis remembered the news that MGM had revealed to the public a while ago.

MGM's decision to license the production and printing rights of DVDs and videotapes to external parties caused a sensation throughout Hollywood.

Hollywood giants like MGM have always had relatively fixed operating models for their copyright libraries. They typically sign exclusive cooperation agreements with offline video rental chains like Blockbuster, while the production of DVDs and videotapes is either outsourced to professional manufacturers or the film studios build their own production lines.

However, MGM broke with this traditional model this time, announcing that it would sell the production and printing rights of some works in its copyright library.

This means that once a company successfully obtains this license, it will be able to independently produce, print, and sell the relevant works in the MGM copyright library.

However, it only covers works up to the end of 1998; new works after that date are not included.

Almost all mainstream media outlets criticized MGM's actions, arguing that it was short-sighted and detrimental.

Although MGM can obtain a considerable amount of licensing fees in the short term by selling licenses, in the long run, this will seriously damage its core competitiveness in the DVD and videotape business, after which the DVD and videotape business will be almost paralyzed.

Don't underestimate this business; with a blockbuster film, it can generate tens of millions of dollars in revenue in a year.

However, that's not what Davis was talking about; he was asking whether Walmart should purchase the license.

"MGM plans to sell this license to only three companies. According to my sources, Amazon is very interested in acquiring this license. If we don't buy it, then there will be a huge cost gap between us on some video works."

As Hollywood's largest copyright library, accounting for almost half of Hollywood's film production, the ability to produce these films themselves is crucial for reducing the cost of video productions.

Glass did not immediately respond, but instead fell into deep thought.

"Do you really believe what the media reports that MGM sold production licenses simply to raise funds to acquire Pixar Animation Studios?" Glass thought of the real owner behind MGM, a man whose behavior had always been unpredictable. Could there be some other conspiracy involved?

This sale of licenses may not be simply a way to raise funds, but rather a step in his overall strategy.

When Davis heard this question, he shook his head slightly. "I don't know. However, Ernst's optimism about Pixar Animation Studios and the field of computer animation is an open secret in the industry."

"As early as two years ago, he made a strategic investment in Pixar through his investment company, acquiring a 24% stake, which is verifiable."

He added, "Now that Steve Jobs has focused all his attention on Apple, he intends to sell half of his Pixar shares, and it's not impossible for MGM to acquire them."

"Disney's hand-drawn animation has declined, and it is also interested in Pixar, hoping to make up for its shortcomings in computer animation by acquiring Pixar. The two sides will definitely compete to reach an astronomical price."

"MGM is currently expanding across the board, and relying solely on bank loans will put them under severe financial strain. It's not impossible that they might have to sell production rights as a result."

Davis glanced at Glass. "The key question is, do we have a choice? If we can't bring our costs down below Amazon's, this competition is pointless."

Walmart is well aware that in the video production industry, Walmart cannot compare with Amazon, whether in terms of the variety and quantity of videos or the amount of inventory.

Walmart's choice to compete head-to-head with Amazon in this product category also has its considerations.

Imaging products are a necessity in the online retail sector, with a wide user base, including both young and middle-aged people, who have a need to buy or rent imaging products.

Choosing this product category as a competitive breakthrough can quickly attract user attention, increase overall traffic and user activity on Walmart's online store, and become a key factor in user stickiness.

Furthermore, the profit margin for imaging products is relatively large. Even with significant price reductions, there will be no serious losses, allowing them to compete with Amazon on price while ensuring a certain level of profitability.

Finally, Walmart possesses a logistical advantage that Amazon cannot match. Once it can rival Amazon in terms of the variety and quantity of imaging products, logistics and delivery will become Walmart's core competitive advantage.

Walmart has built a nationwide logistics and distribution network that enables same-day and next-day delivery services, and even supports in-store pickup. Amazon, however, is currently unable to provide such efficient delivery services due to the limitations of its logistics system development.

In addition, another key factor is that Walmart has successfully established a cooperative channel with Blockbuster.

Blockbuster, as a leading offline chain video rental company, has abundant video product resources and a large user base, while Amazon has powerful online sales channels and logistics systems.

The collaboration between the two parties has created a complementary advantage of online and offline channels, enabling resource sharing and complementary strengths. This is the key reason why they dare to compete head-on with Amazon in this field.

Walmart and Amazon are locked in a fierce battle, and Blockbuster is the one that suffers the most.

This offline chain of imaging giants has been severely impacted by its offline rental business.

According to market research data, Blockbuster's recent store traffic and leasing orders have both declined significantly, with a drop in performance of more than 20%.

Walmart's target is the entire online marketplace, not just the imaging products sector, so there is room for cooperation and shared interests between the two parties.

Having defeated Amazon, Walmart restored the price of video products, and Blockbuster's rental business will naturally recover.

"Then let's do as you say. Let's contact MGM first," Glass made the final decision.