Wal-Mart Ventures to Digital Distribution Again; Buys Vudu

Wal-Mart Stores confirmed that it will purchase struggling digital distributor and online movie service provider Vudu.Walmart

The amount playing for the deal remains undisclosed.

The idea behind the move is that customers will eventually prefer to rely on online services to watch movies rather than buy DVDs. DVD sales have declined in the past few years. Retailers and studios used digital distribution to fill in the lack of sales.

Vudu currently has 16,000 movies and has licensing deals with almost every major studio and distributors.

Vudu was initially established to cater Internet-connected set-top boxes. It failed to attract customers. At the Consumer Electronics Show (CES) early this year, Vudu said that it will stop its hardware business and concentrate instead to partner its software with established manufacturers. Sharp, Sanyo and Toshiba are among those who agreed to release Blu-Ray players and HDTV with built-in connection to Vudu.

Electronics store Best Buy is trying to make a similar strategy by making a partnership with CinemaNow.

This is the second attempt of Wal-Mart to venture out in digital video business. In 2007, a partnership with Hewlett-Packard led to a 10-month web store. The early demise was due to price restrictions made by movie studios that were still holding on to their DVD business.