Walmart-Dreamworks Deal Could Reshape Movie Retail

   

Walmart Stores, Inc. (WMT) announced today that it is launching an exclusive tie-in program with DreamWorks Animation SKG (DWA) surrounding the March 26th release of DreamWorks’ latest animated feature, “How to Train Your Dragon.” The companies tout the deal as both unique and a game-changer in the way retailers can work with movie makers.

Walmart has had some big success with its exclusive deals with musicians. The first deal they made, in 2005 with Garth Brooks, resulted in millions of album sales. The retailer followed that with an exclusive recording from the Eagles, which sold even better.

The agreement with DreamWorks revolves around toy tie-ins that will only be available at Walmart, and special packaging for products from other manufacturers, including Kraft Foods (KFT), Kellog Company (K), PepsiCo, Inc. (PEP), and toy maker Spin Master Ltd. There’s also a promotion with McDonald’s Corp. (MCD) for an activity book tied to the movie that will be available in the 1,000 McDonald’s stores that are located inside Walmart buildings.

In New York City, where Walmart has been fighting a losing battle to build a store, a 40-foot Viking ship with a crew of “live Vikings” is set to dock in Times Square for a two-day stay. Walmart has been shut out of many large cities, including New York and Chicago, even though the proposed stores have generated a good deal of public support.

The advertising blitz for the movie starts this week with TV, radio and print ads, and includes a 30-second spot that will be shown on 13,000 movie screens across the country.

This is hoopla raised to the power of 10, at least. Walmart and DreamWorks hope, of course, to create an unprecedented level of excitement for the movie, generous free press coverage in the 2,500 locations that will participate in the promotion, and demand from the children who will see the movie for the related products.

Walmart has surrounded the movie with the promotional extravaganza in an effort to juice-up same store sales, but the idea probably has longer term goals as well. First, it raises the stakes in the movie tie-in derby by locking up the merchandising rights to what is expected to be a hugely popular film. If competitors like Target (TGT) now want to play in this ballpark, they’re going to have to spend some serious money.

Second, the DreamWorks deal helps position Walmart as an innovative marketer that will deliver higher returns than a movie might otherwise enjoy. If Walmart can deliver big licensing revenue for DreamWorks, other studios will start to line-up with the big retailer hoping to score their own bonanzas.

Finally, and this is a somewhat more iffy, Walmart could be searching for a way to get exclusive rights to movies that it could release through its recently-purchased Vudu group. That’s probably a ways in the future, and DreamWorks might be too big to tumble for that kind of deal.

Still, the model is there if you look at the music deals Walmart has done. Walmart has had some major success with exclusive music deals, but the financial and marketing rewards available with movies are far larger and more potentially lucrative. That’s got to be what this is all about.

Note: Paul Ausick works for Walmart Stores.

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Article printed from InvestorPlace Media, http://investorplace.com/2010/03/walmart-wmt-dreamworks-dwa-how-to-train-your-dragon/.

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