Vudu takes HD lead; enough to stay alive?

Vudu, the product and service that brings downloadable movies to TV sets, is chugging full-speed-ahead when it comes to adding HD titles to its on-demand video service. This week, there were reports that Vudu's catalog now has more than 1,100 HD titles, leading a pack that includes AppleTV and Xbox. Still, when I think about the business model for this product, I can't help compare it to TiVo in the early years. And, no, that's not a good thing.

TiVo made a lot of mistakes in those years as it relied on word-of-mouth marketing to introduce a never-seen-before technology - there were no ads (well, there was that one that involved football greats Joe Montana and Ronnie Lott and a bad case of jock itch - but that was hardly an example of a good commercial.)  And when you really don't know what the product does, it's kind of hard to ask consumers to cough up several hundred bucks for yet another living room set-top box and then commit to a monthly service fee.

OK, maybe TiVo and Vudu aren't that much alike. But the basic premise of my argument stands up:

• Vudu is an expensive ($299) set-top box that requires more money to use it, in the form of movie rentals and purchases.
• I haven't really seen any commercials or other sort of "hey-look-at-how-cool-we-are" type of marketing efforts.
• The idea of bringing downloaded movies directly into the TV set is still an early-adopter concept that will likely grab the attention of the mainstream via established brands such as Netflix and Blockbuster. This playing field is already getting crowded and, despite having the largest library of HD titles, I suspect that Vudu will be overshadowed by the bigger names.

Yes, TiVo is still around but, even after all of these years, it's still a niche product that's trying to build a broader following. The cable and satellite guys launched their own DVRs, bundling the functionality into their own set-top boxes. And while the generics weren't nearly as feature-rich as TiVo, users who had never experienced a DVR were impressed and satisfied with the scaled-down versions they were offered. TiVo has been somewhat successful at getting the cable and satellite companies interested - but not on a widespread basis.

Vudu could very well be headed down that same path. AppleTV, built on an established brand name, has not been able to move beyond the hobbyist phase, even though it offers features that go beyond renting or buying movies. If Apple can't make a dent in this market, how will Vudu do it?

Now that Vudu has taken a huge lead in its catalog, the company should be fast-forwarding promotions and other efforts to get those boxes in living rooms so folks can experience the pretty cool features that go with it.  The holiday season kicks off in just weeks and the only promotion I've heard about is a $200 "movie credit" through Best Buy.

And then there's that other thing that's got a dark shadow cast over Vudu: trouble at the company. This summer, the company's CFO left for "personal reasons" and there was a round of layoffs. Then, earlier this month, CEO Mark Jung left the company for "personal reasons," which seemed odd because, according to paidcontent.org, the company was reportedly looking for a buyer.

I have to admit that those sort of headlines make me nervous about investing in a product that's still not on solid ground - especially in these tough economic times.

(Disclosure: Prior to working at ZDNet, Sam Diaz worked briefly for the public relations firm that represents Vudu but did not work directly on the account.)