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Wal-Mart adds Net offer

Retailer enters the video download market with a DVD option and plans a proprietary service.

November 29, 2006|From Bloomberg News

Wal-Mart Stores Inc. said Tuesday that it would test a proprietary video download service next year and join Apple Computer Inc. and Amazon.com Inc. in vying for a slice of the fast-growing market.

The retailer began selling the "Superman Returns" DVD with a video download option unavailable at other U.S. retailers.

Wal-Mart's entry into video downloading pits it against established competitors in Amazon's Unbox service and Apple's iTunes Music Store, which already competes with the retailer in online music sales. The market will expand further next year, when video rental companies NetFlix Inc. and Blockbuster Inc. may start their own services.

"This isn't Wal-Mart's expertise," said Edward Woo, an analyst at Wedbush Morgan Securities in Los Angeles. "They had a chance to wipe out iTunes and that obviously didn't happen. I can't tell you the last time someone said, downloading music, go to Wal-Mart."

Amazon Unbox, unveiled in September, sells downloadable television shows and movies. Apple sells TV shows, music videos and Walt Disney Co. movies through iTunes.

Wal-Mart offers music downloads for 88 cents, compared with 99 cents at iTunes.

Wal-Mart customers can choose from three download options with the purchase of the "Superman Returns" DVD: $1.97 for portable devices, $2.97 for personal computers and laptops, and $3.97 to cover all such equipment. That compares with $1.99 for TV shows through Amazon Unbox and for shows and music videos on Apple's iTunes.

The "Superman Returns" DVD will come with a video download "feature sticker" on the cover. Customers then must log on to walmart.com/superman, enter the promotional code and choose the desired download format.

After users create an account and install the video-download manager, the purchase is completed and the download begins. Customers can begin watching the movie while it downloads.

Wal-Mart closed its online video rental business in May 2005 and began referring customers to NetFlix Inc., the Los Gatos, Calif.-based company that leads online rentals. Now, DVD rental companies are eyeing the download market.

NetFlix plans to spend $40 million before taxes on developing a download service next year, Chief Financial Officer Barry McCarthy said last month. The company said it would provide specifics in January.

Blockbuster Inc., the world's largest video rental chain, may start a movie download service next year, Chief Executive John Antioco said Tuesday.

Time Warner Inc. next year intends to install in-store kiosks that allow shoppers to download films onto DVDs, CEO Richard Parsons said Tuesday.

Wal-Mart will test downloads because they're a format customers want, spokeswoman Linda Blakley said. The download service will offer movies and shows from a variety of studios and TV networks.

Shares of Bentonville, Ark.-based Wal-Mart rose 10 cents to $46.71.

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