Back at the height of the dotcom bubble, Amazon was signing lucrative deals with traditional retailers to be their online store. One of the biggest such deals was with Toys “R” Us. It was announced with much fanfare in 2000 and was supposed to last a decade. Toys “R” US would handle the toy buying and inventory management, Amazon would handle the Website.
It made sense until, oh, about 2004, when Toys “R” us filed a lawsuit for breach of contract. While Amazon was perfectly happy to be the exclusive online presence for Toys “R” Us, it didn’t feel that it had agreed to make Toys “R” Us the exclusive of provider of toys on Amazon. A New Jersey court ruled in favor of Toys “R” Us back in 2006. But only yesterday did Amazon finally settle with Toys “R” Us, agreeing to pay $51 million.
In an SEC filing Amazon states:
On June 11, 2009, Amazon.com entered into a settlement agreement in its lawsuit with Toys “R” Us, Inc., and its affiliates, with terms that include, among other things, (i) a one-time payment from Amazon.com of $51 million in the third quarter 2009, substantially all of which was unanticipated and will be charged to “Other operating expense” in the second quarter, (ii) dismissal of all claims and counterclaims, and (iii) mutual releases.
Nine years after the initial agreement, that particular dotcom hangover is finally over. It lasted almost as long as the original deal was supposed to be. The lesson here: don’t hand a key part of your business to someone else, especially if it is where your growth is going to be coming from. That is the same as handing control over your destiny to someone else.
(Photo credit: Flickr/Daniel Chan).
Sobering! Yep. Relationship can really suck. That’s why the smartest guys shave their heads and go live in a mountain.
Some one really needs to make a TV show with all these fun, fun multimillion dollar cases..
I’d watch it if it was centered around Internet-based mistakes, blunders and factoids. Like those who illegally make millions via the stock market, get caught, lose in court and pay a fine, that ends up being a fraction of their ill-gotten gain, only to have already started a VOIP co. Vonage, anyone? Karma is a bitch.
A bit more expensive than my sunday mornings!
If they finalized the settlement yesterday, why didn’t they file with the SEC yesterday?
O m gosh.. a free ipod.. really.. all I have to do is give you the email addresses of six friends.. wow.. I better sign up fast cause online when companies say it is free they mean it.. and when they say it is not a scam well they mean that too.. TC is a tech website.. since when.. what is this crap.. I thought TC was a drama site. you got amazon paying Toysrus millions.. mikes on going battle royal with Facebook..
Hurry people sign up for this non scam. It is true he put like 20 !!! because that makes us believe..
Well there was a spamming link for 30 seconds.. which I made fun of and then TC killed it.. death to the spamming cockroach that was giving free ipods..
I did get a free ipod a few years ago by getting a few friends to sign up for crap. And then they got free ipods. It prob cost us about $10 each. neener neener neeener.
51million is nothing compare to what toyrus could have done with their web operation.
dude those toys are awesome
It’s pretty simple really. People shop amazon for a toy they read about. Toys R Us does not have the toy, nor do they plan to buy it. Amazon makes it available via another source. Who is really at fault?
Would Toys R Us buy it just because someone was searching for it? When is a superstore not a superstore?
Is this the last dot-com bubble mess left?
The thing is Toy’s R Us signed with GSI Commerce to handle it’s web business. Don’t let the “partner” title fool you, typically GSI assumes all the web business and pays the brick and mortar retailer a 15% royalty just for using the brand name. (GSI normally carries it’s own inventory as well). Maybe their agreement is different but this is how GSI typically does deals. Appears Toys R US handed over its destiny again shortly after the Amazon deal. http://gsicomme.../en/ourpartners
Oh, this is like the arrangement Sport Authority has. Some entity has an agreement with Sports Authority to use their name on the web, as Sports Authority really does not have ‘their own’ website, so to speak.
$51 mil that’ll help .interestingly 10% of that amount was = to the Toys.com domain purchase made by Toys’R'Us recently