Will Wal-Mart Rule Digital Media and DVD Rental Through VUDU?

On February 22, 2010, Wal-Mart (Walmart) announced that it had acquired the digital entertainment provider VUDU, Inc (1). This three-year old online video up-start company offers an array of digital technologies as well as services that allow the delivery of movies and TV shows to broadband HDTV's and Blu-Ray players. This enables customers that own Internet-ready TVs and Blu-Ray players and who have broadband Internet access to rent or purchase movies and other programs without the aid of a cable or satellite TV service.

With Wal-Mart having acquired VUDU, this means that it can now sell TVs and other media devices that come equipped with VUDU's digital entertainment technology. VUDU also offers a suite of Internet applications and services via its VUDU Apps program. Some of these Internet applications and services include platforms such as Facebook, Pandora, Flickr, and Twitter, as well as newspapers such as The New York Times and The Associated Press.

This is not the first time that Wal-Mart has attempted to launch a movie download business. In 2007, Wal-Mart partnered with Hewlett-Packard to provide HP Video Merchant Services to consumers (2), a venture that never really became profitable. Before that time, Wal-Mart had tried, and failed, to start a DVD rental service. This service was eventually sold to Netflix in 2005 (3).

Will the acquisition of VUDU turn Wal-Mart's luck around? The case for Wal-Mart's success includes the fact that Wal-Mart now actually owns, rather than simply partners with, a leading digital media company. VUDU offers world-class streaming video in 1080p, which is not yet available with Wal-Mart competitors such as Netflix (1). VUDU also has licensing agreements with major movie studios, as well as independent and international movie distributors. Finally, VUDU has announced deals with companies such as Samsung, Sanyo, Sharp, LG Electronics, Vizio, Mitsubishi, and Toshiba to install its service into their devices.

Given such advantages, it is no wonder why Wal-Mart paid a reported $100 million for the Silicon Valley start-up (porn included) (4). However, some critics claim that Wal-Mart may still lose out overall. Wal-Mart's VUDU purchase came late in the game of on-demand movies for TV. Best Buy has already partnered with Sonic Solutions to offer digital movies via Sonic's Roxio CinemaNow service (5). Netflix, Amazon.com, and Apple, Inc. also offer on-demand digital movie rentals. Even in terms of showcasing Internet applications on an HDTV, consumers can simply plug in their current Mac or PC laptop into the TV and run programs there.

Will consumers be inclined to purchase expensive HDTV and Blu-Ray devices to watch movies, especially when they can do the same by simply taking advantage of $9/month membership deals from Netflix? Also, what about those consumers who frequent the very successful Coinstar operation Redbox, where for just $1 they can rent a physical DVD from the Redbox DVD rental kiosk? Only time will tell.

References:

1. Why Wal-Mart wants Vudu http://www.msnbc.msn.com/id/35549049/ns/technology_and_science-tech_and_gadgets/

2. HP Breaks New Ground with Video Merchant Services, Wal-Mart First Customer http://www.hp.com/hpinfo/newsroom/press/2007/070206a.html

3. Netflix takes over Wal-Mart DVD rental business http://www.engadget.com/2005/05/19/netflix-takes-over-wal-mart-dvd-rental-business/

4. Wal-Mart shuts down Vudu porn distribution
http://www.tgdaily.com/games-and-entertainment-features/48588-wal-mart-shuts-down-vudu-porn-distribution

5. Can Wal-Mart beat the tech giants? No http://money.cnn.com/2010/02/23/markets/thebuzz/index.htm