At Walmart, digital movie download success

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

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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