Wal-Mart Punches Movie Ticket

Retail Giant Buys Vudu to Deliver Videos Over Broadband

By Todd Spangler -- Multichannel News, 3/1/2010 11:07:00 AM

The world’s biggest retailer is reopening an Internet movie storefront.

Wal-Mart Stores last week announced plans to acquire Vudu, a privately held Silicon Valley startup that offers some 16,000 videos for rent or download-to-own through Internet-connected TVs, Blu-ray Disc players and set-tops.

The move puts Wal-Mart back into the fastevolving market for delivering paid entertainment content over broadband Internet pipes, territory being staked out by a constellation of players including Netflix, Apple and Blockbuster — which will potentially compete with pay TV providers for consumers’ home-entertainment dollars.

For Wal-Mart, Vudu represents a bridge into digital-content distribution as sales of physical DVDs drop off , according to Parks Associates analyst Kurt Scherf.

“I’m wondering if Wal-Mart will more aggressively pursue Web-connected CE devices on their retail shelves,” he said. “That would give them the benefit of having the cuttingedge products and the residual revenue that will come from downloads and rentals of the content through a connected TV or Blu-ray player.”

Financial terms of the Vudu deal were not disclosed. Wal-Mart, which had $405 billion in sales last year, said the acquisition is not material to earnings for its quarter ending April 30. Wal-Mart paid “slightly more than” $100 million for Vudu, The Wall Street Journal reported, citing an anonymous source.

“The real winner here is the customer,” Wal-Mart vice chairman Eduardo Castro- Wright said in announcing the deal. “Combining Vudu’s unique digital technology and service with Wal-Mart’s retail expertise and scale will provide customers with unprecedented access to home-entertainment options as they migrate to a digital environment.”

Wal-Mart is coming back to online movies after abandoning a previous attempt in 2007. The retail giant shut down its movie service, which offered up to 3,000 movie and TV titles for sale online the same day as DVD release, after less than a year in operation.

Vudu has licensing agreements with major movie studios — including Walt Disney Studios, Lionsgate Entertainment, New Line Cinema, Paramount Pictures, 20th Century Fox, Universal Studios and Warner Bros. Entertainment— as well as independent and international distributors to offer approximately 16,000 movies, including more than 3,000 high-definition titles in 1080p HD format.

Originally, Vudu offered its service solely through its own set-top box, but recently shifted to a strategy of delivering the content through broadband-enabled TVs and Blu-ray players. Partners announced to date include LG Electronics, Mitsubishi, Samsung Electronics, Sanyo, Sharp, Toshiba and Vizio.

Santa Clara, Calif.-based Vudu will become a wholly owned subsidiary of Wal-Mart. The companies said the deal is expected to close within the next few weeks.

Shortly after Wal-Mart announced the deal, Vudu began notifying partners of its After Dark pornography channel — offered in partnership with AVN Media Network — that the adult service will be discontinued and requested that content providers voluntarily terminate their agreements.