Will Vudu Cause A Movie Rental Revolution?

Renting movies is big business. Long the domain of the brick-and-mortar video store, it was revolutionized almost 10 years ago with the introduction of Netflix (NFLX). But while Netflix remains locked in its ongoing turf war with Blockbuster (BBI), newcomer Vudu has arrived on the scene with the hope of revolutionizing the movie rental industry all over again. The odds, however, are against it. Even Apple (AAPL) has found little success with its Apple TV product so far.

Downloading movies is currently one of the most hyped technology trends out there. Everyone from Microsoft (MSFT) to Sony (SNE) wants a piece of the download action — even though there is little evidence that anyone is actually making money. Still, one only has to look at the download trends on peer-to-peer networks to see how committed consumers are to downloading movies. According to a study conducted earlier this year by market research firm Advanis, 79 percent of the total number of downloaded movies are done so on illegal peer-to-peer networks. Advanis also reported that illegal downloads cost the movie industry $598 million per year.

Vudu is trying something new: allowing consumers to download movies to their Vudu set-top box in the living room. In an ideal scenario, this might actually work.

When compared to Slingbox and TiVo (TIVO), the Vudu box is a simple idea that even the most novice movie renter can use with very little effort: Set up the box, pick one of the 5,000 movies available for rent, agree to pay the rental fee of $2 to $4 and for the next twenty-four hours, you can watch it as many times as you’d like.

Of course, cable companies could do the same thing as Vudu. But as we all know, cable providers offer tortured consumer experiences. And while cable companies currently provide a similar service with their on-demand offerings, the Vudu box can offer a much wider array of titles that are more likely to appeal to the average consumer. In fact, if just one percent of the 30 million people traveling to a rental store each month decide to adopt Vudu as their only rental option, this device can have a major impact.

That, however, is an ideal situation, and we don’t live in an ideal world. As David Pogue explained in his recent New York Times column, the Vudu box contains some movies you’d be interested in seeing, but “plenty of the movies are pure filler.”

To make matters worse, Pogue explained that the Vudu box is a victim of Hollywood’s arcane movie release order. Oddly, Vudu gets movies while they’re available on DVD and pay-per-view, but they then drop off the list until they’re shown on TV — sometimes a year later. To further illustrate the immense power Hollywood wields over Vudu, Pogue points out that some movies are available for purchase and rent, while others can only be bought. Even worse, “the list includes hundreds of movies from some studios (Paramount, Sony, Warner) and only a handful from others (Disney).”

As Apple is keenly aware, Hollywood still dictates the success and failure of products. With such extensive Hollywood oversight, Vudu may be unable to provide users with the movies they want. After all, regardless of the quantity of movies, users are still looking for movies worth watching. And if the average consumer can’t find a movie to watch in a list of 5,000, the end result will be swift — failure.

Don Reisinger is a freelance technology journalist who covers everything from Google to HDTVs. He currently writes for over 15 popular technology publications, including CNET’s Digital Home, InformationWeek and PC World.