vudu MAGIC?

Walmart pushes digital shift

Walmart, the nation’s largest seller of DVDs, is trying to get its millions of customers to make the switch to digital as disc sales continue to decline in its stores.

Beginning today, the retail giant will exclusively offer digital movie cards, starting with Sony’s “Battle: Los Angeles,” that let consumers unlock the alien invasion pic and watch it online via Vudu or through any of the 300 devices, including TVs, Blu-ray players, set-top boxes and Sony’s PlayStation 3, that stream movies via the venture.

The card, priced at $14.96, resembles a traditional gift card, and only offers access to the standard-definition version of the pic — enabling Walmart to promote Vudu, which it owns, while protecting higher-priced Blu-rays, which are seeing sales gains, despite consumers’ growing interest in cheaper rentals.

After buying Vudu early last year for about $100 million, Walmart has recently put more marketing muscle behind the subscription-free VOD service, which competes with the likes of Netflix, Amazon, Best Buy’s Cinema Now and Dish’s Blockbuster, among others, to put it in front of more of the retailer’s customers.

It had already been offering digital copies, $5 credits or bonus rentals for films on Vudu packaged with hundreds of DVDs and Blu-rays, representing more than 8 million discs sold at Walmart.

Vudu has a library of more than 20,000 titles, and charges $14.99 for standard and $19.99 for HD film purchases. Rentals start at $3 for older fare and $4 for newer titles.

Through signage in stores, and displays on HDTV screens in newly revamped electronics sections, the retailer has also hyped the service’s ability to offer digital versions of films day-and-date with their disc releases. Because of Walmart’s clout, most studios don’t impose a 28-day-delay on Vudu that Warner Bros., Universal and Fox force on Netflix.

Last month, Vizio agreed to add a dedicated Vudu button to remote controls that power its line of HDTVs, 3DTVs and Blu-ray disc players, making Vudu the second streaming service — after Netflix — to get such a prime spot. And Vudu also recently tapped the Filter (whose lead investor is Peter Gabriel) to supply its recommendation engine based on users’ viewing habits.

In the past, Walmart accounted for 30% of Hollywood’s homevideo biz. But just like the studios, Walmart’s bottomline has also taken a hit from the decline of the DVD (down 16% last year, according to the Digital Entertainment Group), forcing it to consider other options.

Although most home entertainment is still accessed on DVD and Blu-ray discs, digital video now represents a quarter of homevid volume, according to market research company NPD.

During January and February, Netflix’s growing digital service accounted for 61% of downloaded and streamed movies on the Web in the U.S., NPD said. On-demand services from cabler Comcast came in at 8%.

Walmart wants a bigger share of the online biz, which saw digital sales increase by 17% and VOD grow 21% in 2010, the DEG said.

But Walmart first felt it needed to educate more of its customers of how Vudu works and needed to entice them to try it by making it as easy as possible.

It turned to the gift card format, considering customers are familiar with cashing in the cards, and wanted to give them a similar tool to convert something physical to digital, whether it’s for themselves or as presents for others.

Gift cards have quickly grown from a $25 billion biz in 2006 to $100 billion this year.

“Digital movie cards are a great way for Walmart’s millions of movie customers to own and watch digital movies through the Vudu service,” said Edward Lichty, general manager of Vudu. “By partnering with Sony Pictures Home Entertainment on this exclusive new movie card, we’re transforming a physical purchase into a digital ownership experience, in a way that is easy for customers to understand and access.”

The exposure should also considerably benefit Sony, or other studios that will follow with their own cards, considering “Battle: Los Angeles” is expected to be the first of several new movie cards Walmart will roll out this year on the same day that a film’s DVD and Blu-ray also bow.

“Digital movie cards allow us to take digital transactions into high-traffic, brick and mortar retail environments like Walmart, and provide a bridge from the DVD aisle into the digital age,” said John Calkins, executive VP of global digital and commercial innovation for Sony Pictures Home Entertainment. “Our goal is not only to educate off-line consumers about the digital films and services available to them, but also to increase the convenience of buying and gifting digital content.”

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