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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.
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