Amazon to challenge Wal-Mart

Giants face off in vid biz

The video download biz is getting a big shakeup courtesy of two of the country’s biggest DVD retailers.

With Wal-Mart — which sells about 40% of the country’s DVDs — entering the arena Tuesday, existing players face a monster competitor whose purchasing powers in homevideo could give it a leg up in the digital space, where insiders say it will be able to wrangle similar terms.

But, which launched its videostore in October, is trying to stay one step ahead of its new competitor. The e-tailer will today start a test of a partnership with TiVo that will allow users of the digital video recorder to watch downloaded movies and series on their TVs.

Since it’s the first physical retailer to start selling digital downloads, Wal-Mart should gain an advantage from its sheer size (other physical DVD retailers have complained about its leverage for years).

Online competitors may face a disadvantage. Most notably, several sources confirmed that in order to sign its recent deal with Paramount, Apple had to agree to pay more for digital copies of library titles than bricks-and-mortar retailers do. That presents a very lucrative option to studios, which can get more money from Apple without having to manufacture and ship a DVD.

That’s why at least some of the other majors, along with indies like MGM and Lionsgate that have deep catalogs, are expected to follow Par’s lead and start selling library titles on iTunes soon.

Apple still wants better terms for new releases than retailers get for DVDs, however, which is why most studios are reluctant to put new movies on iTunes. Only Disney, in which Apple CEO Steve Jobs is the largest investor, has agreed.

Though Amazon is ahead for the moment, Wal-Mart is looking at various digital solutions for moving downloads to the TV and also has plans to launch the capability to burn DVDs later this year, as do other e-tailers. But for now, it’s counting on its breadth of content, retail promotions and the quality of its service to help it stand out.

Wal-Mart also has the key advantage, thanks to its existing homevideo relationships, that it’s the only vidstore to offer download-to-own movies from every major studio.

The company already has an online musicstore, which has done very poorly against iTunes. Wal-Mart is not only aiming to do better with video but to make it part of a broadly integrated digital and retail solution.

“Over time, it will evolve into a multiformat video experience in stores and online where the consumer can discover content and get it in whatever format they wish, whether download, DVD or a Blu-ray or HD DVD disc,” said Kevin Swint, head of digital media for

Company is considering ways to highlight movie download availability in stores. It plans to repeat a promotion it offered earlier this year in which consumers who bought the “Superman Returns” DVD got to download the movie for just a few dollars. It is also offering very competitive prices. While all library titles on iTunes cost $9.99, Wal-Mart has some for as cheap as $7.50. Most new releases are priced at $14.88, 11¢ cheaper than the standard price on iTunes.

Downloads work on Windows PCs and portable devices but not on iPods.

For its part, Amazon will let Unbox buyers move their TV and movie downloads to their TiVo with a single click for the same price.

“It’s no secret that people like to watch video, especially movies on their TV, and we’re very happy to now give them an option,” said Roy Price, product manager for Unbox.

Microsoft is currently the only moviestore to give users a simple way to watch downloads on their TV, via the Xbox 360, and has seen higher-than-expected demand. Amazon is hoping that its Unbox service, which hasn’t gotten much traction since launching in October, will get a leg up by giving TiVo owners a simple way to watch downloads on the TV.

Service will only work with owners of TiVo series 2 or 3 standalone boxes, a relatively small market of fewer than 1.6 million consumers as of Oct. 31.

The inability to watch downloads on a TV is the No. 1 complaint of most consumers, industryites say. Amazon, which has a much wider selection of movies and TV shows than Microsoft’s Xbox Live, will surely tout its early solution to that problem.

Deal could be more beneficial for TiVo, which is looking for added features to offer buyers of its standalone DVR, on which company makes significantly more money than through partnerships such as one soon to launch with Comcast. Though users won’t be able to access Unbox directly through their TiVos yet, those who download a movie or TV show at will see it automatically show up on their TiVo boxes along with recorded TV shows.

TiVo previously had a deal to test Internet video-on-demand with Netflix, but that partnership was eventually canceled. Netflix now lets its subscribers stream movies on their computer but not download them.

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