August 21, 2011 4:34 pm

Walmart’s online movies overtake Amazon

Walmart has become one of the largest providers of movies online in the US, overtaking established operators such as Sony and Amazon and competing directly with Apple’s iTunes store, according to a new report.

The retailer is the largest seller of DVDs in the US and has generated $3.5bn in revenues for Hollywood in 2010, according to IHS Screen Digest, a media research firm.

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But with physical disc sales in steep decline, Walmart has been aggressively building an online presence. It bought Vudu, an online film store, last year and has discounted prices of digital movies to increase market share.

The report from IHS Screen Digest found that Vudu’s share of the nascent digital movie market – which includes digital downloads and online movie rentals – rose from just 1 per cent in the first half of 2010 to 5.3 per cent in the first half of 2011.

Walmart’s growth came at Sony’s expense, said Arash Amel, the report’s author. “The Sony PlayStation store fell out of the top three rankings chiefly because [of] Vudu,” he said. “The global security breach that shut down Sony’s online gaming operations during the first half [of 2011] had a deleterious impact on the PlayStation store’s business.”

Walmart recently launched its Vudu service on the iPad device, saying it wanted the service to be available “anywhere and everywhere”.

But it has some way to go before it overtakes Apple, which remains the dominant online movie retailer. Apple’s iTunes store slightly increased its share from 64.9 per cent to 65.8 per cent of the market.

Digital film sales are growing, albeit modestly, and represent only a tiny fraction of the revenues generated by physical discs. Revenues from DVDs generated more than $20bn a year at their peak five years ago but total US online film sales and digital rentals were just $229m in the first half of 2011, compared with $183m in the first half of 2010.

Total US digital revenues, which excludes subscription operators such as Netflix, will be $487m by the end of 2011, according to IHS Screen Digest.

With online movie sales not growing as quickly as expected, several operators have changed tack. Amazon has shifted its online movie business to a streaming video-on-demand model: the online retailer has made 9,000 movies and television programmes available to members of its Amazon Prime premium delivery service.

Amazon has also increased the number of movies and TV shows available on its instant video service, following recent content deals with CBS and NBC Universal. It now has 100,000 titles available to buy or rent online: users of the service will be able to stream TV programmes the day after they have aired in the US.

The addition of new content to the Amazon service comes as Hulu, the online video site owned by NBC Universal, Walt Disney and News Corp, is nearing a sale, with potential buyers due to submit first found bids.

Microsoft was the second-largest online movie retailer in the first half of the year, thanks to its Zune Video Marketplace, according to IHS Screen Digest. But the group’s share of the market declined to 16.2 per cent, from 18.5 per cent during the same period in 2010.

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