Wal-Mart, retailers vie for bigger entertainment share

Wal-Mart Stores Inc. wants to be known as a solution provider, not just a destination for socks and bananas, which is likely why it continues to delve into entertainment media.

It’s been more than three years since Wal-Mart purchased Vudu, a video-streaming service based in Silicon Valley, and while the retailer does not breakout sales from its services, analysts said Vudu, like most of the other players in the space, is gaining subscribers.

Target Corp. announced in May that it was testing a video on-demand in a service called Target Ticket with its employees, with instant access to 15,000 titles, new releases and next-day television programs. A Target spokeswoman said in May, “During this phase, we are gathering valuable information that will help shape future plans. We will share additional details when they become available.”

Unlike Target and Amazon, Wal-Mart’s video streaming business is not tied to its namesake brand, and Vudu maintains a separate website from Walmart.com.

Revenue from streaming and downloading services in the U.S. are expected to top $4.5 billion this year, according to Juniper Research, and it’s clear that brick and mortar retailers want some of that share, given their competitor Amazon is well ahead of the curve.


Insight Corp. said the market has grown at a compounded rate of 29% since 2010 as consumers have illustrated their willingness to pay for content going back to the success of iTunes and the 29 million subscribers that Netflix has garnered.


Carol Spieckerman, CEO of New Market Builders in Bentonville, said being in the streaming space gives the mammoth retailers some leverage when negotiating exclusive release rights.


“Since Wal-Mart became a player in licensing Disney, several other brand houses have hung a shingle in Bentonville to be near the retailer’s home base,” she said.


Wal-Mart’s entertainment endeavors are part of the journey the retailer is taking to accomplish other things like exclusive releases and digital data gathering and analysis, according to Spieckerman.


Retail consultant Jason Long with Shift Marketing Group, said brick and mortar retailers are likely delving into streaming media as a defensive strategy focused on regaining lost revenue and blunting Amazon.
 
“Think about what could happen if Wal-Mart didn’t get into streaming, they cedes eyeballs and engagement opportunities to Amazon and others, and they would be out of the DVD movie business in 3-5 years, also losing leverage with major movie studios,” Long said.


Wal-Mart said in June that over the past two years, consumers have made Wal-Mart a destination for TV series on video purchases, especially during the first quarter whether in-store and streaming through Vudu.


CROSS MERCHANDISING

Long said if consumers had to go elsewhere to find the DVDs they want, that studios who cater to the retailers today would have less incentive to do so.
 He said popular releases also give Wal-Mart the opportunity to cross-merchandise that could led to incremental sales.



During a Wal-Mart Store Tour in June, company officials told the media that one of the most popular brands in the store was anything linked to the popular cable series Duck Dynasty.

It just so happens the No. 2 and No. 3 DVDs sold by Wal-Mart in the first quarter were Duck Dynasty Series 1 and 2.
 Duncan Mac Naughton, chief merchandising officer for Walmart U.S., said the Duck Dynasty tee shirts were the best selling in that category for men, women and boys. From lunch boxes to band aids the Duck Dynasty brand is a big seller at Wal-Mart, so it’s no coincidence the DVD sales were so high.


Long said the retailer also had a recent tie-in with the Superman movie launch, which in streaming the movie, you might also be encouraged to purchase a tee shirt or action figure.


STAYING RELEVANT

Analysts said Wal-Mart and other retailers increasingly need to provide streaming media so they don’t lose their edge in the electronics category.
 Long said as a major player in the device space, by owning Vudu they can ensure the devices they sell are wired with that service.


Spieckerman said Wal-Mart continues to do a good job taking their customers where they want them to go, which is quite different from meeting them where they are.
 She said Vudu is just one important vertical entertainment piece for Wal-Mart, but tying that to exclusive releases and licensing deals adds more layers of opportunity to drive revenue and brand recognition to a demographic who may or may not shop a physical store.


Long added that like Amazon Prime customers, consumers who spend more on electronics and media streaming tend to shop more frequently and may represent a higher income demographic over Wal-Mart's core customer.

“Even though Netflix, Apple, Hulu Plus and Amazon Prime own streaming right now, there’s a place for a trusted retail brand to take share in this category in the years ahead. Especially with Vudu’s competitive advantage of converting DVDs to digital,” Long said.


He said Wal-Mart and other retailers largely sat by as Apple co-opted their revenues derived from music.  


“These retailers are bound and determined not to let that happen again with streaming video,” he added.


Long wouldn’t be surprised to see Wal-Mart make a larger acquisition in the fragmented streaming sector if they are to enjoy a larger slice of the pie.