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Wal-Mart, The Grand Delusion, Part II

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Back in the 1990s, you knew things were getting a tad frothy when you found companies with essentially no expertise in a “hot business” expanding into businesses they had little or no clue about. A good case in point: Enron and its broadband push. They thought bandwidth was like energy, and well rest is a well known tragedy.

jackass21.jpgThat’s just one example of 1990s style corporate stupidity. If you go through the archives of The Industry Standard, I am sure you will find more. Well into the first decade of the new century, you see delusionary behavior making a strong comeback.

Today, WalMart, which has enjoyed little success with its previous technology expansion plans, announced its desire to get into the movie download business.

One can’t fault them for trying, after all how much can you squeeze your ecosystem and offer everyday low prices. The landscape, when it comes to movie downloads is no different than the digital music market. Every one came, saw, and whimpered away. (Read: Digital Downloads or Dot Bombs of today)

One should expect the same play-by-play action this time around. There are too many me-too download services out there, muddying the waters and confusing the consumers about which movie or television they can download from where, and why. Which device should they get in order to take their digital purchase along with them.

In this land of confusion, it seems once again Steve Jobs will look like a messiah – a device which works with the videos you download from iTunes store. Simple – unfortunately you can’t say the same about Wal-Mart. As Paul points out on NewTeeVee, “There is a question of what might happen to always low prices when customers start calling up asking for online support. Hard to steer them to one of those friendly greeter-folks through a browser.”

Photo: courtesy of Desktop Wall Paper downloads for the movie Jack Ass 2

13 Responses to “Wal-Mart, The Grand Delusion, Part II”

  1. I always like reading comments from “experts”. Wal-Mart is in business to make profit; they must have thought this download business will be profitable so they will be doing it. People should just wait and see.

  2. Basically Wal-Mart (and Best Buy, Circuit City, Target, etc.) have a choice… they get into the e-retailing of music and video, or they lose a big fraction of their future business. Do we actually think that we’ll be buying movies and music on CD/DVD media 5-10 years from now? I think not.

  3. OM – Your observations re. customer care are right on. In the case of Walmart’s digital music service – Walmart on-line reps were inundated with calls re. music downloads (now thats for a .99 cent download with less than 10 percent margins). Walmart spent that and then some just fielding calls for a sub-par service). They may know how consumers behave in their isles while shopping – but as you put it well – know how they manage their devices at home is best left to the folks like Steve Jobs.

  4. This was smart move by Wal-Mart, with 40% of the DVD sales, they had to do this to protect their business. They have the money, distribution, and customers so it makes perfect sense. When Blu-Ray/HD-DVD takes off, they’ll still make dvd sales and will be able to offer downloads for customers who don’t want the dvd media.

    That doesn’t mean that can’t screw it up, especially if they put the wrong people in charge (i.e. clueless managers). Customers put up with slow lines in their store for the cheap prices, but if they make software clunky/buggy/slow, they’ll lose out to the next guy who will be waiting to scoop up all those customers.

  5. I have no problem with WalMart trying this.
    IF they succeed, great. Any pricing advantages they can get (IF) should also rub off onto others.

    I’m not a Wal Mart – or Target – or other semi-discount shopper. I can’t claim to know their customers. But it just seems to me that downloaded videos – and, really, music too) are a bit of a “luxury” and not a real “fit” for those stores. As was pointed out, DVDs and CDs are where the “bargains” are. The people with enough money to buy lots of movies this way just for convenience probably shop at Nordstroms – and Apple!

  6. Not fair Om – when old style companies miss the online boat we all criticize them for having their corporate heads up their corporate as**es. Here Wal-Mart is beating the dot coms to the punch and you imply they should let Steve Jobs do the job.

    Nope, this is a good and bold move, bravo Wal-Mart!

  7. The big hurdle on digital download as a business is not technology or media savvyness. It is ease of use and the power to get the media companies to agree to favorable legal terms. Walmart could probably hire the expertise it needs to solve the first three issues, and it is better suited than anyone to have the power to get the media companies to agree to favorable terms.

  8. Kyle Austin

    Walmart today announced that they are officially jumping into the movie and television download business head first, and will launch their new site later today.

    This is an extremely crowded market and Walmart will compete against other movie download sites like CinemaNow, MovieLink, Amazon Unbox and iTunes. In addition to battling Netflix’s new service and an expected download entry from Blockbuster in the not so distant future.

    However, one major technology flaw for Walmart is the lack of a solid recommendation engine to discover the movies on the site.

    In 2005, Walmart was the scene of “RecommenderGate” when consumers looking for Planet of the Apes were directed to movies about Martin Luther King Jr. Expectedly this was found offensive to many and was all over the blogosphere. The end result was the whole recommender system being taken down and the loss of customer respect for the service. This problem could have been solved if they were using a more sophisticated recommendation engine like those used by some of its competitors.

    Don’t think they are up to speed with the recommendation engines being used by Netflix, Movielink and Blockbuster..

  9. Whydrive

    On the other hand, people should be supporting Walmart in this endeavor. Walmart is one of the few companies that can force the studios to lower the prices on movie downloads. It just doesn’t make sense when a DVD (with more features) can be bought at a price lower than a download off of iTunes. The more successful Walmart and others are in this business, the more pressure they’ll be able to exert on the studios.

  10. …I suppose you can’t blame a company for trying new things, but this is a silly initiative for a solidly “brick an’ sticks” company like WalMart.

    The only real question is whether it’ll last any longer than their failed previous attempt to take on NetFlix and Blockbuster…

    …and how does “no bargain here” $10-$20/movie mesh with their race-to-the-bottom pricing strategy anyway?