Wal-Mart's Vudu Makes a Difference

Evan Niu, The Motley Fool
Updated

Looks like I'm wrong so far when it comes to Wal-Mart's (NYS: WMT) online video-streaming service, Vudu.

I didn't think the retailer would be able to make a difference in the highly competitive digital movie market. The Financial Times reports that Vudu has grabbed 5.3% of the digital movie market for the first half of 2011, according to a report from IHS Screen Digest. This compares to a 1% share in the first half of 2010.

The report also goes as far as to say Vudu has overtaken incumbent rivals Sony (NYS: SNE) and Amazon.com (NAS: AMZN) . Sony's decline was partially attributed to the company's major security breach a few months back that the company is still trying to recover from. While this report may come as good news for Wal-Mart, it has one glaring omission: subscription services.

Ignoring subscription video services automatically disregards the growing user preference toward subscription models evidenced by Netflix's (NAS: NFLX) dominance and Hulu's success. The report defines the digital movie market to only include digital downloads and online movie rentals. By that definition, it cites Apple (NAS: AAPL) as the dominant player at 65.8% market share.

In contrast, a separate study done by NPD Group earlier this year, which included movies downloaded and streamed, pegged Netflix as the leader at 61% and shrank Apple's share to 4%. Amazon has recognized the trend toward subscription-based services and has been focusing its efforts on expanding its streaming library available to Amazon Prime members, which may also add context around its lagging downloads and rentals.

Regardless of how you define the digital movie market, Vudu is clearly making headway. The service recently took direct aim at Apple by releasing an iPad-optimized version of its website, bypassing Apple's App Store and the 30% cut that comes with it. In the face of declining revenue from physical DVD sales, Vudu will only partially offset the loss, and its overall impact will likely remain negligible. But for now, this Fool stands corrected.

At the time thisarticle was published Fool contributorEvan Niuowns shares of Apple and Amazon.com, but he holds no other position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Wal-Mart Stores and Apple.Motley Fool newsletter serviceshave recommended buying shares of Amazon.com, Apple, Netflix, and Wal-Mart Stores.Motley Fool newsletter serviceshave recommended buying puts in Netflix.Motley Fool newsletter serviceshave recommended creating a diagonal call position in Wal-Mart Stores.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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