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Wal-Mart Buying Vudu

2/24/2010 12:34:24 PM Eastern

Bentonville, Ark. -Wal-Mart is acquiring Vudu, the
Internet video download service.

The Santa Clara, Calif.-based company will become a wholly-owned
Wal-Mart subsidiary after the deal closes within the next few weeks. Terms of
the acquisition were not disclosed.

Vudu began as a download-to-own or download-to-rent video
distribution service that required a proprietary set-top box. Since then Vudu
has been incorporated into a growing number of IP-enabled TVs and Blu-ray
players through which consumers can download some 16,000 films and stream hundreds
of Internet applications and services including Facebook, Flickr, Twitter, The
New York Times and The Associated Press.

 "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," said Wal-Mart vice chairman Eduardo
Castro-Wright. "The real winner here is the customer."

"We are excited about the opportunity to take our company's
vision to the next level," added Vudu executive VP Edward Lichty. "Vudu's
services and apps platform will give Wal-Mart a powerful new vehicle to offer
customers the content they want in a way that expands the frontier of quality,
value and convenience."

The deal would put Wal-Mart in the position of owning an embedded
service that is sold through competing retailers. It is unclear whether retailer
reaction could impact vendor support for Vudu going forward, and if the service
could become exclusive to derivative Walmart and Sam's Club models.

Vudu is currently offered on LG and Mitsubishi TVs and Blu-ray
players, which are not carried by Wal-Mart, but will soon be added to products
under brands the discounter does sell, including Sanyo, Sharp and Vizio.

The announcement follows Best Buy's partnership in November with Sonic
Solutions, through which the chain will sell, market and promote the company's Roxio
CinemaNow video streaming services in packages with broadband services and
various connected devices.

Following an aborted digital download venture with
Hewlett-Packard in 2007, "Wal-Mart is re-entering the OTT [over-the-top] market
at an opportune time," observed Kurt Scherf, research VP at Parks Associates, a
Dallas-based market research firm and consultancy. Usage of paid online video
services including movie rentals and movie and TV downloads doubled between
2008 and 2009, he said, and revenues for premium video rentals and downloads are
projected to grow from $2.3 billion this year to $8.4 billion by 2014.

At that point, more than 40 percent of transactional revenues for
premium online video services will be through connected devices such as
connected TVs, Blu-ray players, game consoles, and networked digital media
set-top boxes, the company predicts,

"With Wal-Mart's
retail muscle, this could mean significant growth of more Web-enabled consumer
electronics products," Parks Associates said.