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Amazon Takes on Disney’s Superheroes in Online Fight

Aug. 11 (Bloomberg) -- Amazon.com Inc. is taking on Walt Disney Co. and its superheroes in its quest to gain more control over pricing online.

Amazon blocked pre-orders of Disney’s summer hit movie “Captain America: The Winter Soldier” and other titles in disk form, repeating a tactic used in recent disputes with book publisher Hachette and film studio Warner Bros.

The move signals that Amazon, the world’s largest Web retailer, is increasingly willing to keep certain items from consumers to put pressure on its vendors. It also spotlights the extent of Amazon’s clout in the home-entertainment market. Studios count on sales of DVD and Blu-ray versions of their movies to help deliver profits because few films reach profitability in theaters.

“They are squeezing studios on DVD pricing, understandable given their market position,” said Michael Pachter, an analyst at Wedbush Securities who rates Amazon the equivalent of a hold. “Disney can’t cut them off, and Amazon can cut Disney off, so I would say Amazon has the leverage.”

Amazon’s clashes with media companies have intensified in the past months as the Seattle-based company, under pressure from investors to reduce losses, seeks to use its heft during negotiations. While the dispute with Time Warner Inc.’s Warner Bros. got resolved, the spat with French publisher Hachette Book Group is escalating.

First Time

Home Media Magazine reported the disappearance of the pre-order option for some Disney DVDs, also including “Muppets Most Wanted” and “Million Dollar Arm,” last week. When Amazon removed pre-orders for Warner Bros. titles from mid-May to late June, it was the first time it used the tactic during negotiations with a movie studio, Home Media Magazine said.

Paul Roeder, a spokesman for Burbank, California-based Disney, declined to comment. Amazon didn’t return calls seeking comment.

“Maleficent,” another Disney summer blockbuster, also wasn’t available for DVD pre-order on Amazon’s website, although customers could order the movie and “Captain America” on its online streaming service.

Sales of home entertainment delivered over the Internet now make up more than one-third of the market in the U.S., up from 4 percent in 2004, according to researcher IHS Corp., as customers turned to sites such as to Apple Inc.’s online stores and Amazon.

The home-video market is key for studios’ profitability because they split ticket sales with exhibitors.

‘Captain America’

“Captain America” was the top-grossing movie in U.S. and Canadian theaters, according to researcher Box Office Mojo. Among the Warner Bros. pre-orders that Amazon blocked for about a month earlier this year were “Transcendence” with Johnny Depp and “The Lego Movie,” the second top-grossing movie this year. Those titles are now available.

In digital-book sales, Amazon dominates with a 60 percent share of the market, according to Forrester Research. The online retailer also helped pioneer the e-book market with the introduction of the Kindle device in 2007.

Last week, Amazon made its case for lower book prices in its standoff with Hachette, saying that sales of titles go up when prices are cut, based on data gathered on its website. For every copy of an e-book that sells at $14.99, Amazon would sell 74 percent more e-books if priced at $9.99, the retailer said.

A letter signed by more than 900 authors was published in the New York Times yesterday, urging readers to tell Amazon Chief Executive Officer Jeff Bezos what they think of the disagreement over the price of digital books. Amazon had itself asked readers to contact Hachette CEO Michael Pietsch last week.

‘Punitive Actions’

Pietsch responded to individuals who e-mailed him through Amazon’s campaign.

“We are negotiating in good faith,” the CEO told them in a letter. “These punitive actions are not necessary, nor what we would expect from a trusted business partner.”

The dispute started because Amazon is seeking more profit and market share at the expense of authors, bookstores and Hachette, Pietsch wrote, calling on Amazon to restore Hachette authors’ books to normal levels of availability.

“Just as paperbacks did not destroy book culture despite being ten times cheaper, neither will e-books,” Amazon said last week in a letter on one of its websites, readersunited.com. “We will never give up our fight for reasonable e-book prices.”

Amazon also appealed directly to authors in a letter last month, offering them all of the proceeds from the sale of any e-book during the dispute.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net Cecile Daur, James Callan

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