A Vudu Buy Would Be Good for Wal-Mart — And Bad for Everyone Else

Peter Kafka at MediaMemo reported this morning that Wal-mart is in talks to acquire Vudu, which, if true, could very quickly make the brick and mortar retailer a powerhouse in the digital media realm. After all, Wal-mart is where many people in the US buy their consumer electronics, and where many also get their entertainment, so it only makes sense that the retailer would want to marry a digital storefront on as well.

Adding Vudu would give the retailer instant access to the digital market, and would give it immediate reach across a number of connected devices that Wal-mart sells or plans to sell. Vudu’s streaming video service will be embedded on devices from seven of the top nine CE makers, including HDTVs and Blu-ray players from LG, Mitsubishi, Samsung, Sanyo, Sharp, Toshiba and Vizio.

It could pave the way for consumers to buy content on one medium or distribution platform and access it through another. In other words, someone could buy a DVD at one of its stores and be able to stream the video on walmart.com or on a connected TV. These types of services are being built through initiatives by Disney and the Digital Entertainment Content Ecosystem (DECE) consortium, and a limited version of such a system is already available from Amazon.com. But having a retailer like Wal-mart, with a huge brick and mortar presence, roll the service out to consumers would go a long way toward mainstream adoption.

It would also allow Wal-mart to “own the customer.” Currently, the retailer’s relationship with a customer mostly ends when the customer walks out its doors. But if Wal-mart could tie together its brick-and-mortar, online, and Vudu billing systems into a single authentification system, it could gather enormous amounts of data about individual user’s purchase history and media consumption — which could allow it to better target him with special offers that are suited to his interests.

But if Wal-mart is going to make such a move, now is the time to do it. The market is wide open for retailers to enter the digital space, with only Apple’s iTunes and Amazon’s On Demand service having any serious traction. Through a partnership with Sonic Solutions to white label its CinemaNow movie service, Best Buy is working on creating a digital storefront that will be embedded on connected devices, most likely starting with its own Insignia and Dynex brands of TVs and Blu-ray players. But with no products along those lines shown at CES, it appears Best Buy is a long way off from rolling those services out.

There are some potential pitfalls, of course. For one thing, the CE makers that have already committed to having Vudu embedded in their TVs and Blu-ray players — including may have to re-jigger their deals with Vudu or potentially lose shelf space due to retailer channel conflict. After all, it’s difficult to see Best Buy or Amazon.com agreeing to sell products with a Wal-mart branded video store on them.

There’s also always the question of integration, but assuming that Wal-mart is able to execute on an acquisition strategy, keep Vudu’s CE partnerships mainly intact, and find a way to integrate its digital storefront with its brick and mortar storefronts, no one would be in a better position to own the living room than Wal-mart, the company that could sell you a TV and could also sell you the video you want to watch on the TV.