The world's biggest retailer has long struggled to dominate the streaming video market against competitors like Netflix, Apple and Blockbuster. Now Wal-Mart is taking a new tack, The New York Times reports.
Sources told the Times that Wal-Mart has agreed to buy VUDU, a three-year-old company that embeds its streaming technology into high-definition TVs and Blu-Ray DVD players. Wal-Mart and VUDU began briefing movie studios and TV makers about the deal on Monday.
Control the User Experience
At the International Consumer Electronics Show in January, VUDU announced deals to embed its technology into equipment from Samsung, Sanyo, Sharp and Toshiba. It already has deals with LG Electronics, Vizio and Mitsubishi. VUDU doesn't yet have any deals with Panasonic or Sony.
Why is Wal-Mart investing in a company that provides an embedded technology into brand-name electronics?
"This is all about trying to control the user experience and give Wal-Mart more direct access to the customer," Tim Bajarin, principal analyst with Creative Strategies, said in an e-mail. "The goal would be to integrate these services into next-generation TVs and Blu-ray/DVD players and try and integrate them into users' overall digital experience to make it easy for them to gain access to movies over the Internet on demand."
The Future Is in the Cloud
"This is a major trend and one that has a lot of potential if done right," Bajarin added. "Best Buy's approach, which includes cloud-based movie downloads of Cinema Now, is another great example of how this will work as they, too, will integrate these on-demand movies into an easy-to-use platform that can work with devices that have an Internet connection."
Contrast this with Netflix's approach, where users stream movies either by watching them on a laptop or buying and plugging in an Internet-aware device from Roku. That's one more box and one more ugly cable consumers have to wrestle with. Industry observers expect consumers will eventually embrace new devices that enable streaming video as seamlessly as switching to a DVD.
With Wal-Mart in the business of streaming content, sales of Internet-connected devices are expected to improve. Further down the road, e-commerce on the TV could be extended beyond entertainment to infomercials and product sales. Certainly, Amazon.com is paying attention to web browsing on the TV.
VUDU's original concept was to sell a set-top box that would allow users to stream Hollywood movies in high definition to their televisions. But, like TiVo and Roku, VUDU struggled to sell boxes to consumers. Under the leadership of Alain Rossmann, a cofounder who took over as CEO in 2008, VUDU switched its business model from making and selling set-top boxes to offering an interactive streaming service that manufacturers could embed in devices.
Apple, of course, is also trying to establish itself as a retailer of Hollywood content, but it has so far kept to renting and selling downloads, rather than enabling streaming, and its iTunes software is only available on PCs, laptops and Apple's handheld devices. Apple TV -- a set-top box offering -- has largely failed in the marketplace, in part because it is tethered to computers running iTunes.
To put it another way: Apple TV strives to make the television an adjunct of the PC, while Internet-connected devices try to bring the Internet to the television. Thus, VUDU offers versions of popular web services like Facebook, Twitter, Flickr and Pandora.
"Ultimately, the retailer wants to use this as a way to provide more direct services to their customers and leverage the relationship they develop from these services to provide consumers other Internet-related applications and services over time," Bajarin said.
Posted: 2010-02-23 @ 11:51pm PT
Netflix support is now also integrated into several consumer devices, so it's not correct to state that Netflix requires a separate device.