September 12, 2006 8:49 pm

Wal-Mart sets stage for digital action

Wal-Mart is pushing ahead with plans for a digital video downloading service, as it seeks to protect its market share from fresh online competition.

The retailer, whose customers buy more than one out of every three DVDs sold in the US, has published job advertisements for a business manager to head what it describes as a new digital video category at Walmart.com.

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The job advertisement does not give any details of when Wal-Mart will launch its planned service, but it implies that the retailer has already settled the technical parameters and at least a basic outline of its business plan.

Apple Computer on Tuesday unveiled its digital video downloading service following the launch last week of a rival service by Amazon, the largest online retailer.

The responsibilities of Wal-Mart’s business manager of digital video will include “defining pricing strategies to maximise market share” – one of the most contentious issues facing the retailer’s relationships with Hollywood. Wal-Mart has been reported by Hollywood studio executives to have signalled that it would be unhappy should the studios sell digital movies to Apple at prices that would undercut the prices it pays for physical CDs.

Apple on Tuesday said it would sell new films at $12.99 for the first week after their release on DVD – undercutting the current Wal-Mart new-release price of $15.87, plus 97 cents shipping.

Wal-Mart and other retailers frequently sell big DVD releases at a loss. While the retailer uses the surrounding promotion to drive customer traffic, the studios benefit from increased sales.

Wal-Mart is investing significantly in expanding its digital presence. This month it upgraded its music download site as well as offering its first digital video download linked to this month’s release of a new Janet Jackson album. It launched its music download service in early 2004, with individual songs priced at 88 cents – 11 cents cheaper than Apple’s iTunes.

Last year, Wal-Mart also launched a digital video streaming website called Soundcheck, which features streamed videos of studio performances by a range of performers, such as Nelly Furtado, with links to sales of the music.

The responsibilities of the digital video business manager also include working with stores “to innovate cross-channel strategies and product offerings”, reflecting Wal-Mart’s online philo-sophy of trying to encourage customers to move between its website and its stores.

Wal-Mart said the retailer was “currently in conversations with studios and technology companies regarding the possibility of offering digital download services”, but that no decisions had been made.

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