Wal-Mart adds streaming video to its website

July 26, 2011 12:46 PM PT

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Wal-Mart Stores Inc. has added streaming movies to its website as the world’s largest retailer attempts to grab a bigger share of the online movie market from rival service Netflix Inc.

The decision to offer movie sales and rentals through Walmart.com comes just two weeks after Netflix raised prices for the majority of its customers. The price hike provoked howls of protest from consumers and disappointing subscriber growth projections, leading to a significant drop in Netflix’s stock price.

Wal-Mart, long the nation’s leading seller of DVDs, signaled its intent to double down on digital movie distribution in February 2010, when it spent a reported $100 million to acquire Vudu, a Silicon Valley start-up that was gradually being added to home entertainment devices.

Since the acquisition, Vudu has been able to leverage the giant retailer’s clout with manufacturers to incorporate is service into more than 300 consumer electronics products, including Internet-connected television sets, Blu-ray disc players and the Sony PlayStation 3 game console.

This spring, Vudu began offering movie rentals and purchases via the Web, through Vudu.com, positioning the service to better compete with the likes of Amazon.com, Apple Inc.’s iTunes or Blockbuster.

Offering 20,000 movie titles for rental and purchase through Wal-Mart’s website, which attracts about 40 million monthly visitors, is a further step in that direction. It better positions the retailer to take on established online players, as well as traditional competitors such as Best Buy, which last may bought digital video service CinemaNow.

On Wal-Mart’s website, the movies will be available the same day the DVDs go on sale in stores. Rental prices range from 99 cents to $5.99. Digital purchases are priced from $4.99 to $24.99.

Walmart.com general manager Steve Nave said the retailer is following its customers as they increasingly embrace digital movie rentals and purchases.

“We know customers are starting to shift their behavior, in terms of how they consume their media,” Nave said, adding, “As as customers make that change, we don’t want to lose that customer as they shift to digital.”

Wal-Mart has been a laggard in the digital space, vying for third place with Sony’s PlayStation Store and Amazon’s Video-on-Demand. Its Vudu service currently accounts for fewer than 10% of all transactions -- and even less revenue, because of its 99 cent promotions, according to researcher IHS Screen Digest.

“iTunes is the market leader in this field, accounting for approximately 65% of all movies and TV shows bought or rented over the Internet,” said Arash Amel, IHS’s digital media research director.

Amel doubts that incorporating the Vudu service on Wal-Mart’s site will move the needle, in terms of market share. Consumers have shown through the failures of other services that they don’t want to watch movies on computers.

“The real strategic significance here is this is the fist step in the retailer trying to once more figure out how online video can add any meaningful value to the e-commerce components of its core business of physical goods,” Amel said.

-- Dawn C. Chmielewski