Wal-Mart Looking at Net Video Do-Over

Retailer Looks at DRM Needed to Relaunch Paid Downloads, Sources Say

By Todd Spangler -- Multichannel News, 1/11/2008 8:00:00 AM

Wal-Mart Stores, after shuttering its initial paid video-download service in December after less than a year in business, appears to be actively looking to restart a similar service on its own.

The activity comes less than a month after the world’s largest retailer decided to close its Wal-Mart Video Downloads service after technology services it had contracted for with the large computing firm Hewlett-Packard Co. were discontinued, Walmart.com director of corporate communications Amy Colella said.

In a statement, HP said it discontinued its video-download services because “the market for paid video downloads has not performed as expected, and the broader internet video space continues to remain highly dynamic and uncertain.”

Now, however, Wal-Mart has been investigating how to get back into the space, according to executives at a content-security firm familiar with its plans.

At the 2008 International Consumer Electronics Show this week in Las Vegas, Wal-Mart executives met with digital rights management firms to gather information about what technologies are required to offer a paid download service, according to executives at one of those firms. Specifically, the retailer’s reps were interested in how to allow downloaded movie files to be burned onto discs, for playback on a separate DVD player. That is a feature Wal-Mart’s first service didn’t offer.

Colella declined to comment on whether Wal-Mart was looking to relaunch a download service.

In its first go-round, Wal-Mart opened the “beta” version of its download site in February, offering up to 3,000 movie and TV titles for sale online the same day DVDs are released. Wal-Mart contracted with Hewlett-Packard’s digital entertainment services business unit, to develop the service and provide the infrastructure to deliver the content over the Internet.

On Dec. 21, according to a notice on the video-download site (https://mediadownloads.walmart.com), Wal-Mart terminated the service. The company said customers who purchased videos would not receive refunds, but that videos would still be playable using Microsoft Windows Media Player.

Wal-Mart’s move last year to offer video downloads was seen as a milestone in the shift toward all-digital distribution, as the bricks-and-mortar company -- the biggest seller of DVDs -- started competing directly with the likes of Apple’s iTunes Store and Amazon.com’s Unbox. Wal-Mart had previously scrapped a DVD-by-mail rental business and transferred customers to Netflix.

Presumably, Wal-Mart still has agreements in place to be able to relaunch a video-download offering.

The retailer had secured Internet-distribution rights with cable programmers and broadcasters including Viacom, which provided content from Comedy Central, MTV, VH1, Nickelodeon, Nick Jr. and The N, and News Corp., which offered up shows from Fox, FX, Fox Reality, 20th Century Fox Television Classics and The CW.

Wal-Mart also inked distribution agreements for paid movie downloads the same day as DVD release with the major Hollywood studios: 20th Century Fox, Disney, Lionsgate, Metro-Goldwyn-Mayer Studios, Paramount Pictures, Sony Pictures Entertainment, Universal Studios Home Entertainment and Warner Bros.