Vudu Is Coming On Strong
Ablang
Dorothy Pomerantz, 04.06.11, 06:00 PM EDT
Forbes Magazine dated April 25, 2011
Its online movie service is surging. Apple needs to watch its back.
http://www.forbes.com/forbes/2011/0425/technology-online-movies-apple-netflix-itunes-wal-mart.html
Which company would you wager rented more ondemand movies in the last
quarter of 2010: Amazon or Wal-Mart? If you guessed Amazon, you're
only half-right. The two companies are tied for third in the market
behind Apple and Microsoft. Wal-Mart did 750,000 movie transactions,
according to researcher IHS Screen Digest, putting it on par with
Amazon's rental service.
This is a significant shift in a nascent but fast-growing market. Wal-
Mart is a Goliath of retailing, but in online video it's a David
compared with Apple's iTunes. In 2010 $385 million worth of movies and
TV shows were sold or rented on the Web, 64% of those via iTunes.
Microsoft was a distant second with 8%, leaving crumbs for the rest.
But thanks to Vudu, a nonsubscription streaming service owned by Wal-
Mart, the retailer has been gaining market share at a rapid clip.
While iTunes flourishes within the Apple ecosystem (Macs, iPads,
iPods, iPhones), Vudu is available on 300 different TVs, Blu-ray
players and videogame consoles from the likes of Sony, Philips and
Samsung. "Our objective is to be everywhere," says Vudu head Edward
Lichty.
Vudu is in a good position to compete with Apple. Wal-Mart does $3.5
billion a year in DVD business with the Hollywood studios. That gives
it serious leverage to promote Vudu in its DVD cases. When Toy Story 3
came out on DVD in November, Wal-Mart offered buyers a digital copy
via Vudu. The retailing giant can also offer its usual low prices
online. Vudu has a $2-for-2-nights deal on HD films and offers a daily
99-cent special on movies like Sony's Easy A and Fox's X-Men. Apple
movies cost $3 to $5 for a 24-hour period. Within the year Vudu will
be installed on almost all of the TVs and Blu-ray players sold at Wal-
Mart.
Vudu's new success was a long time coming. At launch the service
required a dedicated set-top box. Hollywood signed on, but few
consumers did. Vudu general manager Edward Lichty joined the company
from TiVo just before the box launched and helped shift the strategy,
abandoning the box and getting the service embedded into Internet-
connected TVs and DVD players. Once stuck in a box, Vudu's software
now lives in the cloud.
As more consumer electronic companies and Hollywood studios signed on
to Web cinema, Wal-Mart took note. Twice before Wal-Mart had tried to
get into this game, once with a Netflix-like mail-order DVD offering
and another time with an iTunes-like download service. Both failed
miserably. With Vudu Wal-Mart saw a chance to finally get it right. In
February 2010 it bought Vudu for $100 million.
Postacquisition, Wal-Mart is keeping its name off the Vudu service.
"We're proud of the Vudu brand and see it as a way to establish a new
brand in the online business," says Greg Hall, Wal-Mart's head of home
entertainment.
For the moment Vudu is avoiding the elephant in the room: the Netflix
subscription service. Lichty says "a decent number" of Vudu customers
use Netflix for older movies and watch new releases through Vudu.
Lichty expects Vudu to expand its footprint into tablets and other new
gizmos. Eventually it could follow in the steps of Netflix and Hulu
and offer Vudu on Apple products. That would be like Goliath handing
David a shiny new slingshot.