Video rental service to compete with Netflix, Amazon

Walmart-owned video rental service Vudu has stepped up to compete with Netflix and Amazon.com for a piece of the online streaming biz: Starting today, Vudu will make its library of more than 20,000 movies and TV show episodes available to stream on Vudu.com.

Previously, Vudu’s service was accessible through its branded set-top box or apps embedded on 300 devices like TVs and Blu-ray players that connect to the Internet — an impressive number but still one that limited its reach to mostly the living room.

Through its website, however, Vudu’s library will now go mobile and be accessible via computers and tablets without the need to download software or any video files.

Vudu does not require a monthly subscription to rent titles. It has priced pics at $2 for two nights on HD films and offered a daily 99ยข special on some movies.

Making the service available to more consumers will likely encourage Walmart to pony up more marketing dollars to promote Vudu. Walmart acquired the service last year for around $100 million after the retailer struggled to launch a Netflix-like, DVD-by-mail service and its own iTunes-like digital download service. It’s primarily let Vudu operate as an independent brand since then.

But Walmart has started hyping Vudu more by offering a digital copy of Disney’s “Toy Story 3″ through Vudu to consumers who purchase the toon on DVD or Blu-ray at a Walmart store, for example, and giving a $5 credit on Vudu rentals to customers who similarly purchased “The Twilight Saga: Eclipse” discs.

Walmart is expected to increase the number of digital copies it offers to promote disc sales in its stores. It’s also integrated Vudu into most of the TVs and Blu-ray players it now sells.

Given the $3.5 billion that Walmart earns annually from DVD and Blu-ray sales, Vudu should easily capture Hollywood’s attention as it looks to bolster its digital library with new titles. Vudu chief Edward Lichty has said it’s already been easier to negotiate with studios “as Walmart, rather than as a startup.”

Walmart’s backing has clearly helped Vudu grow. While Apple’s iTunes dominated the U.S. market for online movies in 2010, with nearly 65% of the $385 million in sales, Vudu came in fifth, behind Microsoft, Sony and Amazon, according to a report by IHS Screen Digest. In 2009, iTunes controlled 74% of the biz.

Netflix wasn’t included in the study because it’s a subscription-based biz, but still one that logged more than 300 million streams of movies and TV shows last year.

Much of Vudu’s growth occurred in the fourth quarter of 2010, suggesting “that Vudu will compete for third place in 2011,” said Arash Amel, research director, digital media for IHS in February with the release of the report.

“The future of the online movie business may come down to a competitive battle between Apple and Walmart,” Amel said. “Although Walmart is not on the charts yet, the company will soon become a major player if its current momentum continues.”

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