Streaming video service has large catalog, Hollywood deals

Walmart, the biggest seller of DVDs in the country, is making sure it’s not left behind as more consumers rent or buy movies digitally.

The retail giant said Monday that it will acquire streaming video service Vudu, enabling it to compete more aggressively with the likes of Best Buy, Netflix and Amazon, which have been partnering with major electronics manufacturers to offer movies through TVs and Blu-ray players that connect to the Internet.

Santa Clara-based Vudu launched three years ago as a maker of set-top boxes that allow paying subscribers to stream or download movies using a Web connection. After it struggled to convince consumers to add another set-top box to their home entertainment systems, Vudu opted instead to focus on integrating its service directly into TV sets and Blu-ray players.

Vudu rents movies for $3.99 and sells them for $19.99. Certain titles are available day-and-date with their DVD release. It’s sold episodes of TV shows for $1.99.

The company offers movies from all of the major studios and has deals with major hardware electronics manufacturers including Samsung, Toshiba, Vizio, Sharp, Sanyo and Mitsubishi.

Nearly all of the TVs and Blu-ray players set to hit the market over the next year will include Internet connectivity and access to iPhone-like applications that will allow viewers to check their Facebook accounts, Twitter feeds and Netflix accounts, for example. Now Vudu will as well.

“We are excited about the opportunity to take our company’s vision to the next level,” said Vudu exec VP Edward Lichty of the deal. “Vudu’s services and Apps platform will give Walmart a powerful new vehicle to offer customers the content they want in a way that expands the frontier of quality, value and convenience.”

Vudu’s relationships with hardware manufacturers will prove key for Walmart as the latter builds its business of digitally distributing movies and TV shows.

Walmart is competing with rivals such as Best Buy, which has already begun offering its own streaming video rental service through Cinema Now, and Netflix, which has been offering its subscribers instantly viewable movies through Microsoft’s Xbox Live service, as well as other electronics manufacturers. Amazon and Blockbuster also offer similar video-on-demand services.

Walmart attempted to take down Netflix in 2003 when it launched a competing DVD-by-mail rental service. But Walmart abandoned the venture in 2005 and started directing customers to Netflix, conceding that the company was “the pioneer in online movie rentals.” At the time, Walmart said it would focus on growing its online movie sales. Buying Vudu will enable it to do so on a whole new level.

Aiding Walmart’s effort: Vudu has deals with nearly all of the major studios and indie film distributors, which has enabled it to offer users a catalog of 16,000 titles, including many in high definition. Vudu also has offered sexually explicit programming through the Adult Video Network, which produces the annual Adult Entertainment Expo in Las Vegas. That is likely to end with ownership by Walmart, known for its conservative business practices.

Walmart already has a strong relationship with Hollywood given the retailer’s clout stemming from the number of DVDs it sells. Studios’ familiarity with Vudu eliminates any need to educate content partners on how to use the service.

The acquisition of Vudu is expected to close within a few weeks.

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