Walmart Buying Vudu To Go After Apple's iTunes, Netflix, Cable

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Retail giant Walmart has agreed to buy Vudu, a Web video streaming service, the New York Times reports.

This represents Walmart’s latest push into online video — after a few failures — in an effort to compete with Apple’s iTunes, Netflix, and the cable industry.

Peter Kafka of All Things D first reported the deal in January. Here’s what we said then:

Vudu is one of a handful of companies that let you rent or buy digital movies over the Internet. But because of its relative obscurity, it has not been a hit.

The idea is presumably that Walmart’s massive retail network — and relationships with electronics companies, which are starting to build Vudu into their devices — could help the service compete against Apple, Amazon, Netflix, Microsoft, the cable industry, and others.

Will it work? Maybe, but only if Walmart can figure out a killer pricing model and achieve a level of ubiquity that other paid, on-demand Web video services have not.

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 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.)

But if Walmart can get this new service built into every device it sells, and offer a really good deal, it might have a shot.

Kafka reminds us that this would be Walmart’s third attempt to get into the movie rental business:

After trying for two years to compete with Netflix’ (NFLX) DVD-by-mail business, Wal-Mart gave up in 2005, and agreed to send its customers directly to Netflix. In 2007, with the backing of all the big studios and tech help from Hewlett-Packard (HPQ), it tried to launch a download service, a la Apple’s iTunes (AAPL). But it abandoned it in less than a year.

In 2008, Apple’s iTunes passed Walmart to become the top music retailer in the U.S.

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