Target v. Disney: the war is heating up

Think you've got channel-conflict problems? Try on a battle where one of your biggest customers refuses to promote your product. Or, from the retailer side -- where a major supplier cuts off shipments of a hot product.

That's the latest in the Great Target-Disney War. Apparently, a memo went out early this month to all Target stores telling them to take the following actions:

• Remove all displays for the upcoming releases of Disney's Cars and Pirates of the Caribbean DVDs, replacing them with signage for rival releases.
• Remove all signage/displays for other Disney merchandise, such as Disney Fairies, Disney Princess, and Little Mermaid toys and apparel.

Why? Target is upset about Disney's pricing of movie downloads through iTunes, which is lower than pricing for the same movies on DVD. We reported on this conflict last month here and here.

Now, according to the Wall Street Journal, Disney is cutting off shipments of the two DVDs to Target.

Next move is yours, Target.

UPDATE: I guess the next move was to de-escalate the situation. Target backed down in the face of the possibility of losing distribution of Pirates of the Caribbean.

Although apparently resolved, the fight underscores the continuing tensions between studios that are trying to move to the digital age by offering their movies for download and retailers that have been important partners in turning DVDs into a gold mine for Hollywood.

If Target had imposed drastically reduced shelf space on Disney, other studios would have been more reluctant to make their own cut-rate deals with Apple, which wants uniform pricing in its catalog. Rival studios are suspicious of the deal because Apple CEO Steve Jobs has become a major Disney investor and director — thanks to the sale of Pixar to the company.

A rapprochement was the best outcome for both sides, analysts said.

"It's like jockeying for positions in a long-distance race," said retail industry analyst Mark Husson of HSBC. "You throw some elbows, but you can't win if you're jockeying the whole time. A natural commercial accommodation is made."