Wal-Mart to acquire Vudu; Should Netflix be worried? Buzz this

Posted by Prasada Martala Feb 22, 2010

The New York Times is reporting that Wal-Mart has agreed to buy Vudu, an online movie service company which used to offer its services through a set-top-box and recently collaborated with Electronics manufacturers LG Electronics, Mitsubishi Electric, Samsung, Sanyo, Sharp, Toshiba and Vizio to provide the online movie streaming service on High Definition Television sets. Wal-Mart's purchase of Vudu places the retail giant in direct competition with similar online movie service offerings from Netflix, Amazon Video-On-Demand, Blockbuster, Apple's iTunes service and EPIX.

With its position as the largest seller of DVD discs and HDTVs, Wal-Mart is expected to use Vudu online movie streaming abilities to increase the sales of internet connected TVs by incorporating the Vudu functionality in the television sets that it sells. Vudu online movie service could also complement sales of physical DVDs by Wal-Mart, which have been seeing a decline in recent past.

While services like Netflix and Amazon VOD bring online media content to HDTVs, EPIX and HBO Go have been trying to facilitate customers watch their programming on computers in addition to HDTVs. Wal-Mart's entry into online movie streaming means increased competition for both categories of online media providers, especially for Netflix and Amazon, as they compete for new content deals and inclusion of their services in internet connected TVs, gaming consoles and DVD disc players.

While Netflix positioned itself as a strong player in online media streaming category, Wal-Mart could give Netflix a run for their money by offering large catalog of high-definition movies through Vudu service at lower prices. Netflix's Watch Instantly streaming service doesn't offer true high-definition in terms of 1080p video and surround sound audio at present, even though the DVD rental company announced that 5.1 surround sound and closed captions are in their 2010 development roadmap.

 Best Buy is said to be developing an online movie store in collaboration with Sonic Solutions, which owns CinemaNow online movie service, to introduce this summer. As Wal-Mart and Best Buy enter the online movie content distribution business, they could use their positions to win favorable content deals from Hollywood studios, which may negatively affect Netflix, Amazon and Apple's iTunes.

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