News

Wal-Mart Punches Movie Ticket

3/23/2010 11:07 AM Eastern

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.