A Silicon Valley start-up offering a TV set-top box for movies on demand is set to launch today, hoping it has the magic touch with consumers who have so far been reluctant to embrace such services.
Vudu Inc., based in Santa Clara, Calif., boasts a library of 5,000 titles for purchase or rental via the Internet, about the same number available in a typical Blockbuster store. Movies such as "Dreamgirls," "Pan's Labyrinth" and "300" can be downloaded to a $399 Vudu device that's connected to the television.
Half of the movies are from major Hollywood studios, including Lions Gate, New Line Cinema, Paramount Pictures, Sony Pictures Entertainment, 20th Century Fox, Universal Studios, Walt Disney Studios and Warner Bros.
"We're bringing a broad array of mainstream content straight into the living room," said Patrick Cosson, Vudu's vice president of marketing and sales.
But Vudu faces competition from cable companies, movie rental giants and new entrants such as Apple Inc., Amazon.com Inc., Microsoft Corp. and Sony Corp., all of which are vying for a piece of a movie rental market that pulls in nearly $8 billion a year in the U.S., according to Wedbush Morgan Securities.
"The competitors are many," said Kurt Scherf, principal analyst with Parks Associates, a media consulting firm in Dallas.
Among the biggest threats to Vudu are cable companies such as Comcast Corp., which has 9,300 programs available on demand, 93% of which are free to subscribers, Scherf said. But the majority of the programs are television shows rather than movies, he said.
For movies, there's Netflix Inc., which has 5,000 titles available on its online download service, along with 80,000 titles through its mail-order rental business. Blockbuster Inc. lists 75,000 titles available through its mail rental service. Blockbuster this year paid $6.6 million for Movielink, a download service with 3,300 movies and TV shows.
Vudu has other hurdles, analysts said. Customers must pay $399 for a device the size of a hardcover book to download and play movies, then pay rental fees ranging from 99 cents to $3.99 per movie. Movies that can be stored permanently on the box's 250-gigabyte hard drive cost $4.99 to $19.99 apiece.
"Consumers have shown that they don't want to add another box to their home if they can avoid it," said Sean Badding, president of Carmel Group, a research firm.
He also said consumers had shown that they didn't like to pay more than $300 for gadgets.
To demonstrate the challenges facing Vudu, Badding cited the failure of MovieBeam, a joint venture among Disney, Intel Corp. and Cisco Systems Inc. that charged $100 for a device and $1.99 to $4.99 for movie rentals. The group sold MovieBeam in March to Movie Gallery Inc., a video rental chain, for less than $10 million.
Cosson said Vudu's device, which can handle high-definition content, could also adjust the display of standard-definition movies to high-definition screens, giving a better picture.
"When you compare it to a high-definition DVD player, it's a bargain," Cosson said.