At Walmart, digital movie download success

At Walmart, digital movie download success

Summary: Thanks to the Vudu acquisition, Walmart has become the third largest retailer of digital movie downloads -- ahead of Amazon and Sony.

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Big-box American retailer Walmart may not consider the World Wide Web its primary source of revenue, but one business has shown surprising growth: digital movie downloads.

A Wall Street Journal report notes this morning that a year after the company purchased movie streaming service Vudu for $100 million, Walmart has become the third largest operator in the space, according to research group IHS -- ahead of Amazon and Sony.

To be fair, the competition isn't as close as "third largest" might suggest. Apple's iTunes and Microsoft's Zune Video Marketplace own 65.8% and 16.2% of the market, respectively. (Netflix is not considered a download-to-own service, and was excluded.)

The potential is great: Walmart has an enormous customer base. But will it be lucrative enough for the retailer?

Miguel Bustillo and Karen Talley report:

Vudu could become Wal-Mart's biggest Internet-related success to date—though that doesn't say much. The Bentonville, Ark., retailer this month said it was ending sales of MP3 music downloads, after failing for years to make a splash. The company also recently announced a management shake-up for its Internet retail operations and the departure of two top online executives, amid continued disappointing performance compared with Amazon.

"The business we're in today, offering first-run movies a la carte, is doing very well right now and has tripled so far this year," Vudu General Manager Edward Lichty said.

One question, is of course, is around the business model for digital movies. Is Vudu's download-to-own (at about $20 a movie) better than Netflix's membership-fee-to-watch ($8 per month for one at a time)?

Moreover, how does Vudu fit into Walmart's greater strategy? Can digital downloads prompt customers to visit Walmart's website more frequently, the way cheap DVDs did the same for its bricks-and-mortar stores?

There remain many questions, but as long as the money's rolling in, it's hard to protest. Still, with major tech companies (Microsoft, Sony, Apple, Google) knocking on the living room door, retail stewardship may be necessary to keep the profits in Walmart's corner.

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Andrew Nusca

About Andrew Nusca

Andrew Nusca is a former writer-editor for ZDNet and contributor to CNET. During his tenure, he was the editor of SmartPlanet, ZDNet's sister site about innovation.

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5 comments
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  • What is the profit share?

    Marketshare is utterly meaningless. Does Apple's 65% marketshare translate to 90% profitshare? How about when you include sales of iPads, iPhones, and iPod Touches?

    That's the thing that is winning about Apple. They don't even need to make a penny from their iTunes store as long as they are raking in the profits from their hardware. When Walmart sells a movie, they make pennies. When Apple sells a movie, it is another brick in a giant wall that will ensure no competing tablet or smartphone will ever make a profit.
    toddybottom
    • RE: At Walmart, digital movie download success

      @toddybottom Yeah, Apple is so winning I gotta wonder when in the future Apple will have antitrust issues.

      http://en.wikipedia.org/wiki/United_States_v._Paramount_Pictures,_Inc.

      Also, I can't stand using anything Apple for the reasons you cite as "winning." Can't dispute it's a winner for Apple, but as a consumer of digital media it's a lose-lose-lose. And don't get me started on how redonkulous concept of using iTunes for things like backups, file and app management.

      An "Amazon Movie Player" to watch stuff I pay for at Amazon? A "Comcast TV Viewer" to watch content form Xfinity? That would not be comcastic!
      neivomonid
    • This is a great comment.

      @toddybottom While we can argue endlessly over the value of profit share vs. market share -- they each have their merits -- you did a great job exposing a major hurdle in Walmart's (or any other retailer's) strategy: third-party vendors lack the leverage that the platform owners have with regard to pricing content.

      Microsoft, Apple, Sony and Amazon all offer software and hardware. While the last two have failed to gain traction in the market, it's hard to believe that a retailer like Walmart, big as it is, will be able to compete on the same playing field without these levers to pull.
      andrew.nusca
  • RE: At Walmart, digital movie download success

    >>> Netflix?s membership-fee-to-watch ($5 per movie)?

    Netflix is BY FAR the best bargain for professionally produced video content and is nowhere near $5 per movie. I am astonished that anyone even pretends to compare other offerings to the breadth and depth of Netflix.

    But, if Walmart decides to really go after Netflix, I am sure they will eventually win.
    neivomonid
    • Price updated.

      @neivomonid You're right, I shouldn't have attempted to estimate a price-per-movie, it's too difficult. It's been changed to $8/mo. for one at a time.
      andrew.nusca