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Wal-Mart enters the video downloading industry February 6, 2007

Posted by Stacey Swift in Internet, media, Retail.
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According an article in the New York times, Wal-Mart plans to break into the video downloading industry.  They recently announced their new partnership with six major Hollywood Film companies including Disney, Warner Brothers, Sony, Paramount, 20th Century Fox, and Universal.  With these new alliances Wal-Mart will offer top selling movies in download form between $12.88 and $19.88 on the day of the release and $7.50 for older movies.  They also plan on teaming up with television stations such as Comedy Central, CW, FX, Logo, MTV and Nickelodeon to offer customers download-able shows for $1.96 an episode.  Wal-Mart teamed up with Hewlett-Packard to create a webcitewith a large online movie database from which customers could purchase movies and download them.  To some this may seem like a risky move considering they just recently failed at trying to break into the online DVD rental battle, and forfeited all its customers to Netflix.  Others are optimistic about Wal-Mart’s success in this new endeavor because they are the number one retailer in so many different industries. 

Will they be able to compete with companies like Apple that are already well established within this industry? 

Is Wal-Mart qualified enough and knowledgeable enough to make it in this industry?

 “As much of an 800-pound gorilla as they are in retail sales, they are an 80-pound weakling when it comes to digital distribution,”  Michael Goodman

I do not believe that Wal-Mart’s new online movie database will be successful.  Apple already has a huge portion of the market and I do not see how Wal-Mart will steal their customers.  Personally, if I could purchase the actual DVD for about the same price as downloading it, I would rather go to the store and by it.  As far as downloading televisions shows, itunes has already made that easy and affordable at $1.99 an episode, only $.03 more expensive.  Many people already have an itunes account and would not want to go through the trouble of setting up another account with Wal-Mart.

Finally, I believe that Wal-Mart is making the same mistake that many companies make when they vertically integrate.  They are not knowledgeable in this new field to be successful.  This is evident from their failed online DVD rental endeavor.

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Comments»

1. Charley S - February 6, 2007

I also agree that this venture by Wal-Mart will be unsucessful, if not a complete bomb. Wal-Mart should be focusing its efforts on improving its current company image, which takes continual bashing in the press. Although, it can’t really hurt Wal-Mart to try a venture like this, since it is large enough that it could easily absorb any losses. At the least Wal-Mart’s entry into this arena will force competitors to innovate and keep ahead of Wal-Mart. Itunes’ video download service last time I checked was not nearly as successful as they hoped, and there are also companies already out there doing the same thing Wal-Mart is going to use, including Vongo and Movielink (both of which I use and work pretty well).

2. Kira - February 6, 2007

I have to agree as well- I think this is a huge risk for Wal-Mart to take. Just because they dominate in one industry (sales) does not mean that they will be able to dominate in other industries, especially with so many already existing successful competitors. It sounds as though that Wal-Mart is relying on their name and reputation in sales for its success in this new industry. This is a very poor idea since as Charlie mentioned Wal-Mart does not currently have such a great image as reflected by the press. One of the reasons Wal-Mart has done so well with sales and low prices is because of their information systems. Unless Wal-Mart plans to significantly differentiate themselves in this new industry, customers will remain loyal to existing competitors like Apple.

3. wilson7 - February 28, 2007

Like the quote about the gorilla and the weakling, and i believe that Walmart should just stick to what they are efficient at and leave everything else alone. Several companies downfalls are when they try to venture of into markets they have no business fooling around with. They are high risk with tiny chances of success because there are already companies that dominate the field. I think that Walmart is making a big mistake with this project.


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