The over-the-top television landscape just got a tad more complicated thanks to Wal-Mart deciding to nab VUDU, the Web video streaming service that is built into some LG televisions and other Internet-connected living room devices.
The world’s biggest retailer is clearly banking on the coming explosion of connected devices; while analysts estimate that less than 5 percent of domestic HDTVs sold in 2009 were Internet-ready, research firm iSuppli estimates more than 60 percent of them will connect to the Internet by 2013. And that gives Wal-Mart an enormous opportunity to become an important over-the-top video distributor for consumers, challenging video-on-demand offerings from the likes of Comcast Corp. and AT&T Inc., and, perhaps, offering consumers a way to bypass the monthly cable, IPTV or satellite subscription entirely.
VUDU has been making a push to take on other services with a similar embedded model – think Netflix on Xbox 360, or even Apple TV. It’s been cutting deals to be automatically available on things like Internet-connected Blue-ray disc players, with 150 product partners expected this year, compared with just eight in 2009. At the Consumer Electronics Show, it announced new plans with Samsung, Sanyo, Sharp and Toshiba, and an expansion of its LG relationship.
It’s that breadth of hardware options soon to be on offer, combined with the marketing clout of Wal-Mart, the world’s largest retailer, that really sets VUDU up to be a viable threat to the old-guard television landscape, analysts say. But does it, or does this simply contribute to ongoing Web video fragmentation?
The idea, after all, isn’t new: Platform vendors like Microsoft, Amazon, Blockbuster, Sony and CinemaNow all have deals with consumer electronics-makers to embed their streaming services. TiVo already challenges incumbent VoD offerings. And Wal-Mart isn’t the only major retailer making such moves: Best Buy owns stock in CinemaNow parent Sonic Solutions, and is in the content rental business through partnerships with both CinemaNow and Netflix, which is available on some Blu-ray players already.
To boot, there are existing Web-only OTT video players like Hulu.com to contend with, which offers mostly free content, and Apple is rumored to be in talks with Disney and CBS for a Web TV paid service costing $30 per month. Google, meanwhile, is known to be mulling a pay-per-view strategy of its own that will serve as a sort of premium version of YouTube.
How the competitive landscape shakes out will, as most things do, boil down to revenue generation. Cable and satellite still hold the cards here, because traditional broadcast outlets continue to command higher advertising rates than online spots, plus they have steady subscription revenue. And they share that with the networks in exchange for a prodigious stable of content. Hence, OTT players, having less licensing money to offer, often have too shallow of a content pool to convince the average American to cancel their cable or satellite subscription entirely. But ... they also aren’t going anywhere anytime soon, and are enough of a chipping away force to make incumbents nervous.
Thus, Wal-Mart wading into the Web TV fray is sure to shine a spotlight on the OTT video scene as a whole. Content owners know they need the Web. Carriers know they can leverage the Internet and cloud access to extend their home broadband/television proposition. OTT players and software companies see an opportunity to capitalize on consumer appetites for anywhere service. Consumer electronics makers see a fresh differentiator to include in their feature sets. And retailers see themselves as the distributors that can pull it all together.
Terms of the deal were not disclosed, but industry consensus pegs the acquisition to be worth more than $100 million.
