Wal-Mart Deal to Buy Vudu Draws Mixed Retail Reactions

The acquisition potentially vaults Wal-Mart into direct competition with a myriad of online video services including Amazon, Apple, Blockbuster, Netflix and Best Buy. Best Buy is expected to launch its own service in the first half using Sonic Solutions’ CinemaNow platform. But it also raises issues for retailers who are preparing to carry Vudu-compatible TVs and Blu-ray players from LG Electronics, Samsung, Sharp, Toshiba, Vizio and others. Wal-Mart confirmed that it agreed to buy Vudu and expects to close on the acquisition in the next few weeks. A Vudu spokesman declined to comment. Terms of the deal weren’t released.

"If I had a choice I would say let Wal-Mart support their own service and good luck and I would not carry the product,” said Mark Shaw, CE merchandise manager at Nebraska Furniture Mart. “The reality of it is that I may have to” carry Vudu-compatible products, but given the choices, Shaw would likely decline because he views it no differently than Circuit City’s Digital Video Express venture, he said. Digital Video Express, dubbed “Divx” for short, was a conditional-access DVD system that Circuit City shopped to rival retailers, with little success. Circuit City scrapped the venture a short time after launching it, but the manpower and resources it devoted to Divx have been blamed in part for landing the chain in financial trouble that led to its liquidation.

While several retailers we polled support NFM’s position, they said the struggling U.S. economy makes them less inclined to take a stand, especially if the feature has Wal-Mart’s financial backing. “When the economy is great, we're a lot pickier,” BrandsMart President Michael Pearlman said. “Right now I just want things that sell. I would prefer to carry somebody else’s product and if one vendor has Vudu and another has an alternative means I'll carry that given the choice."

For Vudu, a sale to Wal-Mart will be a boon for a service that struggled to gain retail acceptance for its hardware, industry officials said. As interest in online video services grew last year, Vudu gained design wins for its software platform and de-emphasized hardware. Best Buy is among the last retailers to sell Vudu hardware and had its BX100 set-top box available Tuesday on its website at $149. Given Wal-Mart’s clout with CE manufacturers, industry officials expect the Vudu platform will gain wider distribution and a higher profile. Among the various widgets being developed for TVs, Netflix currently carries the most clout with consumers, Shaw said.

If the Vudu-capable products prove profitable, Wal-Mart’s ownership of the company may be a secondary concern, Listen Up Senior Vice President Steve Weiner said. Listen Up carried Vudu hardware, but dropped it when the company shifted to a software focus, Weiner said. “If something makes a ton of sense and I can make good money and my customers are going to be happy, if Wal-Mart benefits that really doesn’t bother me because somebody is making money on everything I sell,” Weiner said. “On its own it doesn’t bother me that Wal-Mart would be the beneficiary."

Vudu gives Wal-Mart an avenue to return to the video download business it scrapped in 2007, less than a year after the site went live. Wal-Mart shut down the site after Hewlett Packard discontinued the technology that powered it, a Wal-Mart spokeswoman said at the time. Wal-Mart continued selling physical DVDs and Blu-ray discs in its stores, but remained on the sidelines as Netflix, Amazon and others benefitted from growing demand for video downloads. Mark Seavy