The New York Times is reporting that Walmart has agreed to buy Vudu, a streaming movie rental service. Despite its status as one of the biggest DVD and Blu-ray retailers in the country, Walmart has yet to make any moves into online video—until now. And Walmart (one of Fast Company's 2010 Most Innovative Companies) has the ability to shake up the field more than any other retailer.
Vudu is a well-regarded streaming video service; they started out making set-top boxes but recently abandoned that market to focus on packaging their software into TVs and Blu-ray decks from partners like Vizio, Samsung, LG, Sharp, and Toshiba. Unlike Netflix, the current big dog in the streaming video scene, Vudu also incorporates other media services like Pandora and Flickr, and compatibility with social networking services like Facebook and Twitter (although it remains to be seen whether anybody, anywhere, actually wants to read Twitter on a television). Vudu was the first to stream 1080p video, and still boasts some of the highest-quality streaming video around, but lacks the name recognition, back catalog, and big-money push of Netflix. That last item is certainly no longer a problem, with Walmart at Vudu's back.
Peter Kafka over at All Things D puts the purchase price at "more than $100 million," a hefty sum for a company that's never actually made money. But the purchase makes a lot of sense: Vudu already has great relationships with hardware manufacturers, and a source claims that Vudu was courting Best Buy (Walmart's main brick-and-mortar electronics competitor), Comcast, and Amazon due to its excellent optimization technology. Walmart needs Vudu; the retailer lags behind competitors like Best Buy in sales of Internet-connected TVs, and needs to make a stand in this lucrative and forward-looking market category.
Walmart should be able to promote Vudu-enabled hardware better than Vudu themselves ever could—hardware manufacturers would be much more inclined to bundle in Vudu if they know their product will have the backing of the country's biggest retailer. Whether Walmart will get more involved in the software side of things remains to be seen, but Walmart is known for taking what could charitably be called a "family-friendly" course in terms of which TV and movies it stocks—and Vudu has, among other things, a porn channel, which Walmart will presumably nix as soon as possible.
Other video rental companies should be nervous about this acquisition. Netflix is the obvious target, and Vudu has a long way to go before it's a legitimate challenger to Netflix's throne—but that's not to say it can't happen. Microsoft is making a big push with Zune, but it's currently only available on PC, Xbox 360, and a few portables—not enough. Apple is a non-starter (nobody, even Apple fanatics, likes the Apple TV), and both Amazon and BlockBuster are fading fast.
Redbox is the most interesting competition here; its dirt-cheap kiosks are in thousands of Walmart stores, and now the little company that could has to contend with one of its biggest partners essentially backing a different horse. Redbox declined FastCompany.com's request for comment, but you've got to believe they're a little irked at Walmart promoting a competing service.
[Via The New York Times]