Research Update: Wal-Mart’s Vudu Buy Ups the Ante in Video Rental Market
Wal-Mart’s (WMT) purchase of video streaming startup Vudu should further shake up the turbulent video rental market.
We wrote last week about the challenges facing the physical DVD rental market, after Redbox’s settlement with Warner Bros. 24/7 Wall Street’s John Ogg believes that Redbox owner “Coinstar Inc. (CSTR) is perhaps the targeted loser here. Its shares have dropped over 2% to $29.00 in mid-afternoon trading. This would just be a far more formidable competitor for its Red Box. It has the advantage that it is located at many grocery stores and recently got some of its new release licensing worked out. The Red Box has many locations, but unfortunately it is located at many Wal-Mart locations. That translates to retail destination customer risk.”
The deal also poses another challenge to struggling Blockbuster (BBI).
We have noted David Pogue’s enthusiasm for Vudu, now that its is offered as software in TV and disc player hardware made by others rather than as a standalone box. The New York Times adds that Vudu’s move to a software-based product has gained visible traction over the last few months. “At the International Consumer Electronics Show in January, Vudu announced deals to puts its service into the devices of Samsung, Sanyo, Sharp and Toshiba and said it was expanding its older relationships with LG Electronics, Vizio and Mitsubishi.
Dan Frommer at Business Insider is less enthusiastic about Vudu’s propects, even in the hands of a powerful retailer. “People just aren’t going to go out of their way to spend a lot of money to rent a movie over the Internet, when they can either spend a little money to rent it in physical format, or spend a similar amount to rent it from their cable provider. (The reason Netflix (NFLX) streaming has become so popular is that it’s a free service in addition to your monthly DVD rentals — not something you need to pay extra for.)”
Pogue notes, however, that “The quality is much better than on Netflix, pay-per-view or any other Internet service; you can get high definition–the high-end 1080p kind–and even surround sound. And there’s no monthly fee; you pay only when you watch a movie ($1 to $7, depending on the age and the quality level you choose). For busy people, that’s far more economical in the long run.”
Both agree that Vudu’s main challenge has been its obscurity. Being owned by Wal-Mart will change that.
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