Wal-Mart Stores Inc. today begins selling films online as the leading seller of DVDs stakes a claim in the emerging market of movie downloading.
The store, at www.walmart.com/videodownloads, makes Wal-Mart the first major retailer to offer downloadable digital movies from all the major Hollywood studios.
The online DVD market is crowded with competitors, including Apple Inc.'s iTunes store, online retailer Amazon.com Inc.'s Unbox, premium cable operator Starz Entertainment Media Group’s Vongo and lesser-known download services such as Movielink and CinemaNow Inc. These services are still struggling to find a mainstream audience.
Wal-Mart’s announcement was not surprising, given the retailer’s influential role in DVD sales, a significant source of studio revenue.
As the nation’s top seller of movies and music, with about 40% of the DVD business, Wal-Mart has the leverage to extract concessions from the studios on products and pricing.
Wal-Mart’s online movie store emulates the no-frills atmosphere and pricing of its stores. It undercuts rivals on price, selling downloads of new movie releases for $12.88 to $19.88 and older titles for $7.50. Downloads of TV shows sell for $1.96 an episode.
The retailer will offer DVD buyers a coupon for a discounted downloadable copy of the same movie for $1.97. However, it will not yet permit consumers who download a movie through its online service to make a DVD copy at home, saying the technology is too time-consuming and onerous.
“They have the probably the broadest relationship with the Hollywood consumer because of their vast retail infrastructure,” said Thomas Lesinski, president of Paramount Pictures Digital Entertainment. “This is going to extend that relationship.”
Wal-Mart, the world’s largest retailer, with annual revenue of $316 billion, has been slow to develop a download business.
Its music site, which began a test phase at the end of 2003, made news by undercutting Apple Inc.'s iTunes store on price, selling songs for 88 cents each.
But because songs downloaded from Wal-Mart.com wouldn’t play on Apple’s iPod, the dominant portable music player, the company’s music offering failed to garner much interest.
When the Bentonville, Ark.-based company in November announced its intention to offer movie downloads, some analysts were lukewarm, saying that the endeavor didn’t fall within Wal-Mart’s area of expertise.
Kevin Swint, Wal-Mart’s divisional merchandise manager for digital media, said, “As our customers increasingly want content by download, that’s what we’re trying to support.”