The Download Wars Have Begun

Pulling off quite a coup, Wal-Mart has entered the movie download business with a bang.   In the announcement today, the company announced agreements with all six major movie studios — Walt Disney, Warner Brothers, Paramount, Sony, 20th Century Fox and Universal — to sell digital movies and television shows on its Web site (www.walmart.com/videodownloads), becoming the first traditional retailer to do so.   Wal-Mart, who lost the battle against Netflix on DVD rentals two years ago, sees that the bigger opportunity is in downloads.

The move plunges Wal-Mart into direct competition with established players like Amazon.com, CinemaNow and the 800-pound gorilla, Apple’s iTunes.  Wal-Mart will face a number of challenges.  Apple dominates the digital download space, leaving only a very small share of the market for others to scrap over.  And where Wal-Mart is the king of retailers, they have no real competence in digital distribution.

What they do have is clout and they have leveraged that clout to do what Apple has been unable (or unwilling) to do:  to pull together all the right Hollywood players.  Wal-Mart has also partnered with Hewlett-Packard to create an easy-to-use Web site and develop a broad library of videos.

Movies will run from $12.88 to $19.88 on the day the DVD drops, while older flicks start at $7.50. All movies will have roughly the same price as the actual DVD at Wal-Mart stores, though.  Not sure why download customers would want to fork over almost what you’d pay for the actual DVD, but then again, I’ll do just about anything to avoid going to a Wal-Mart.  The pricing is designed to protect the DVD business which will keep the studios (who have considerable clout themselves) happy.

The service will have TV shows from Comedy Central, CW, FX, Logo, MTV and Nickelodeon.  Major networks are not in the mix as of now. TV shows run a bit cheaper than iTunes, at $1.96 a pop.  Altogether, it will offer “access to 3,000 productions,” with the mix split roughly 50/50 between movies and TV shows.

Just as MP3 downloads have disrupted the CD business (just ask Tower records), digital movie downloads will be disruptive to the DVD business and possibly other CE products such as DVRs.  You can already watch recent episodes of ABC shows for free.  If, in the near future, I can get high-def downloads of shows that I missed, why pay for a hi-def Tivo and the monthly subscription that goes with it?  This disruption could also impact CE retailers who do not move into the digital distribution space.  The war is just starting, but it will be interesting to see how it develops.

<via NY Times>