Wal-Mart To Buy Vudu Online Video Service

Vudu has struggled against tough competition from Amazon, Netflix, Blockbuster, Sony, and Microsoft.
Wal-Mart plans to acquire Vudu, an online video service that offers movies to buy and rent through partnerships with makers of Internet-connected televisions and Blu-ray players.

Wal-Mart announced Monday that Vudu would become a wholly owned subsidiary of the nation's largest retailer. Wal-Mart did not disclose financial terms, but said it expected to close the deal within the next few weeks.

Vudu has licensing agreements with nearly every major movie studio and dozens of independent distributors in offering about 16,000 movies. Nevertheless, the company has struggled against tough competition from companies such as Amazon, Netflix, Blockbuster, Sony, Microsoft, and others.

Wal-Mart's deep pockets are likely to help Vudo compete against far larger players. "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," Eduardo Castro-Wright, vice chairman for Wal-Mart, said in a statement.

Vudu launched in 2006 selling a $400 set-top box for renting and buying movies to watch on the home television. Vudu's offering was similar to the Apple TV, which launched about a year later.

However, Vudu's pricey box failed to catch on with consumers and in late 2008 the company started offering its software to consumer electronics manufacturers to embed in TVs and Blu-ray players. The company's partners include LG, Mitsubishi, Sanyo, Sharp and Toshiba.

The number of competitors offering to stream movies to Internet-connected TVs and DVD players has grown dramatically over the last two or three years. In addition, such capabilities have been added to video-game consoles, including the Microsoft Xbox 360 and Sony PlayStation, making the field even more crowded.

The latest deal is Wal-Mart's second attempt in offering an online video download service. In 2007, the company partnered with Hewlett-Packard in launching a Web store to sell movies and TV shows. The store closed less than a year later.

Nevertheless, consumer demand for Internet-connected TVs that can access Web content, including movies and TV shows, is growing. Nearly 37% of broadband households in the United States are extremely or very interested in viewing Web content on the home television, according to market researcher In-Stat. By 2013, nearly 40% of all digital TV shipments will be Web-enabled.