WalMart is getting into the home video delivery business big time with this week's $100 million dollar purchase of Vudu. Vudu was a box maker in a crowded entertainment segment (Apple TV, Roku, Amazon, Boxee, XBox, PlayStation 3, Cinema Now, Blockbuster). And like all overcrowded market segments, the time has come for attrition. Today, Apple indicated that although Apple TV isn't a primary driver for the company, they are staying in the home entertainment delivery business. But Vudu got out of the box business and decided to go right to the OEMs and installed their hardware directly into the TVs.
Vudu has internet streaming, video on demand (rental or purchase), access to Flickr, YouTube, and Picassa, no subscription costs, the largest library of HD titles from every Hollywood studio, and new releases weekly the same day as DVD. And now WalMart, which has had 2 abortive attempts at the home entertainment business before, is trying to get into your home again. Only this time, the world's largest retailer may have finally gotten it right.
Everyone knows that the DVD is going away within the next 5 years. And 3 years after that Blu Ray is gone too. The problem with the Home Entertainment business is that it's a packaged goods business. People won't pay a premium (like the average cost of DVD) when what they're getting is a file. And the next iteration of entertainment delivery won't be a disc at all, it will be a download. And there's no "packaged good" as a download.
WalMart sells more televisions in the United States than any other retailer. And in between today's current TV, which were just upgraded for the digital transition, and 3DTV (10 years down the road), there will be an opening for a new category for TV's and that will be the internet enabled TV. What fascinates me from a television perspective is that we all thought that the battle for the living room is the battle for the box. Industry thinking was that whoever's single, stand alone box (Microsofts? Comcasts?) that provided the consumer with TV, cable channels, a gaming platform, and VOD would be one of the most profitable companies in the United States. The quest for any company was to be that box. Turns out no company is going to be "that box". The TV is going to be the ultimate convergence device with everything you need built right into your newly purchased TV from WalMart. No red, yellow, white, and blue wires, just plug in your TV, connect to your internet and watch anything you want any time you want.
A funny side note is that Vudu also offered porn, which of course, family friendly WalMart is shutting down. That's too bad too, because everyone knows that whoever can gett porn streamed easily into your household will also have a license to print money. Porn (take home movies) were what started the VHS business and jump started the transition to DVDs (with its smaller, more compact packaging). That's really how take home video business came into existence, with human beings paying to hide their perceived shame.
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