The decision to offer movie sales and rentals through Walmart.com comes just two weeks after Netflix raised prices for the majority of its customers. The price hike provoked howls of protest from consumers and disappointing subscriber growth projections, leading to a significant drop in Netflix’s stock price…READ MORE.
My Take: I am amazed at the speed and scope of the on-demand video revolution. In February 2010 Wal-Mart purchased streaming video provider, Vudu for $100 million and now Wal-Mart is offering streaming video downloads via their website. This puts them in direct competition with Amazon.com, Apple’s iTunes and Netflix.
Clearly, Wal-Mart sees the writing on the wall. A large part of their consumers have made the shift to on demand video purchases and this trend will continue to gain momentum. DVD sales are a significant portion of Wal-Mart’s entertainment sales. If they do not adapt to the times the large pool that once existed will be much small and thus will hit their bottom line in a negative way.
The acquisition of Vudu is interesting beyond the fact that it allows Wal-Mart to offer video on demand through their website. Vudu has an app that is integrated into most, if not all, Internet connected televisions. Therefore, it’s running alongside with other apps like Netflix and Hulu. This is another avenue where Wal-Mart with its size and negotiation power might be able to steal market share from others in the on-demand arena.
I think Wal-Mart’s foresight is correct in that, if the video purchase is going to come through a computer or online enabled television, it needs to adjust where its storefront is. If it does not take such steps, it will hand over a portion of its business to a competitor.
Lastly, as an investor, the obvious trend here for on-demand video plays directly into the wheelhouse of data storage and network component producers. Video on demand takes up a lot of bandwidth and processing power. Thus, networks will need to be upgraded and storage will need to be expanded.