Wal-Mart is Buying Vudu

UPDATED: Wal-Mart (s WMT) is buying over-the-top video company Vudu, according to a report by the New York Times. NYT technology writer Brad Stone reports that both companies have started to inform Hollywood studios and TV manufacturers about the deal. Financial details are not available, and a Vudu spokesperson told us he wasn’t able to respond to our request for comment just yet.

The first rumors of Wal-Mart taking over Vudu appeared in early January, and the deal certainly does make sense for the retail giant. Vudu has been busy forging alliances with CE makers and announced deals with Mitsubishi, Sanyo, Sharp, and Toshiba to embed its app platform on their devices in January. This should give Wal-Mart almost instant access to a large part of the consumer electronics market.
Vudu was founded in 2004 and released a set-top box for web-delivered video in 2007, but the product was unable to gain traction despite a retail partnership with Best Buy. Vudu eventually shifted to providing an embeddable platform for CE makers, and finally stopped selling its set-top box this month.

Wal-mart hasn’t had much luck with online video either. The retailer started a movie download service in early 2007, but its efforts were hampered by a limited catalog, DRM restrictions and a lack of options to watch the downloaded content on the big screen. The download service closed shop only months later.

Fast forward to 2010, and the picture looks decidedly different. Connected TVs are set to go mainstream, and Vudu has deals in place that will put its software on TVs or Blu-ray players from seven of the top nine device manufacturers. It’s unclear what the acquisition will mean for these deals, but one could imagine that Wal-Mart would be interested in running Vudu as an independent unit for the time being, if only for the fact that retail competitors like Best Buy might shy away from selling TVs with Wal-Mart branded software.

Either way, the acquisition could put some serious pressure on companies like Roku and Boxee that are providing competing video and app platforms and devices as well as download services like Apple’s iTunes store and Amazon’s VOD service. Our own Ryan Lawler recently summed it up this way when rumors of the acquisition first surfaced:

“No one would be in a better position to own the living room than Wal-mart, the company that could sell you a TV and could also sell you the video you want to watch on the TV.”

UPDATE: Wal-Mart just sent us a press release confirming the acquisition. The company didn’t reveal any numbers, but said that Vudu would become “a wholly-owned subsidiary” of the retailer. It also said that Vudu would continue to develop its app platform.

Peter Kafka is reporting that Wal-Mart is going to spend more than $100 million in cash on Vudu.