Vudu – Why is Everyone Surprised at Their Success?

In late August 2011, Screen Digest/IHS announced that Vudu now has 5.3% market share of the online movie market in the U.S. – up from just 1% in the first half of 2010.  What surprises me is that everyone is so surprised.

Vudu has a lot going for it.  It is now owned by Walmart, who purchased it in February 2010. Walmart has a significant number of eyeballs that come across its in-store marketing and on, all of which are opportunities for Vudu and ones Vudu (and Walmart) have taken advantage of.  The company easily introduced its millions of customers to the brand and get them to purchase movies.  Second, Walmart has developed a very smart device strategy.  They have integrated the service into a number of televisions and set-top boxes, making the content easily available to the consumer – where they want it – on televisions.  They have also smartly ensured that the service is easily available on computers and mobile devices.

Part of people’s surprise of Walmart’s success with Vudu is that the company wasn’t very successful before when it tried to launch an entertainment portal before.  People just didn’t go to Walmart for content.  A lot has changed since then.  People in general are buying more digital content and are now used to looking for it beyond the typical locations of a video store or their cable or satellite provide.  Initially it was the technically savvy and die hard movie buffs buying digital content.  It has now expanded to the general U.S. audience, which is exactly the customers that Walmart already has.  Additionally, the great focus on devices positions Vudu in front of consumers so they can easily buy.  Additionally, Walmart can develop marketing campaigns that link DVDs purchased at their store to downloads on Vudu.  They have already experimented this to encourage trial of Vudu.  Walmart is the number one retailer for DVD sales, so marketing an extension of a DVD to a digital download makes logical sense – and Walmart is the only retailer – currently – that can do this.

It will be very hard for Walmart to overtake Apple and their movie store, which as 65.8 percent of the online movie market. Apple has a well-integrated store and device system that is difficult to outmatch.  That said, Walmart caters to a different audience – many of which do not have Apple TVs and Mac computers (though they do have iPods).  They do have PCs and a growing number have connected TVs.  They know and trust Walmart, so they will trust Walmart to deliver content digitally as well.

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