Wal-Mart enters digital video market with HP service

Tapping a new service from Hewlett-Packard Co., Wal-Mart Stores Inc. joined a growing field of providers of digital video download services with the launch of an online movie store on Tuesday.

The offering is built on HP Video Merchant Services, a Web-shopping technology also launched Tuesday that allows businesses to set up an online video store. HP holds hundreds of petabytes of digital films and TV shows in its data centers, and provides back-office sales and search applications, said Willem de Zoete, vice president and general manager of Digital Entertainment Services at HP.

Customers like Wal-Mart use the service as part of their online retail offerings, allowing cinema fans to browse movies based on genre, or search by entering the name of an actor, director or film. Customers can then download the movies to play on their PCs or portable video players, or order a packaged disc to arrive in the mail, choosing a DVD, HD-DVD or Blu-ray format.

A first-time user must install a program on the PC before starting the 30- to 45-minute process of downloading a 1.5G-byte movie over a typical household broadband connection, although most can start watching within five to 10 minutes, said Kevin Swint, Wal-Mart's divisional merchandise manager for digital media.

Once the movie is downloaded, each user has the right to transfer it to three separate portable media players using Microsoft Corp.'s Windows Media Player, and to watch it an unlimited number of times. Customers who own media extender boxes can also play the digital file on TV screens, Swint said.

The service will compete against Apple Inc.'s iTunes store, which is limited to movies from Disney and Paramount, in addition to TV and other programs. Other video download services are available from Amazon.com Inc., America Online (AOL), Movielink LLC and CinemaNow Inc. Microsoft Corp. also offers a movie and TV download service to Xbox users.

Wal-Mart claims it has a market advantage over those sites since it offers movies from most of the major Hollywood studios and television networks.

Compared to conventional movie rental stores, the digital movie rental industry is still struggling to build the size of its catalogs. Wal-Mart now sells about 3,000 of the movies and TV shows stored in HP's digital vaults, and expects that number to rise quickly as content providers convert their own libraries to digital versions.

"Today the majority of movies are stored on tapes in buildings. That is a choke point at this moment in time. Part of my focus is to work with Hollywood studios to make movies available in digital file formats," de Zoete said.

Another bar to building larger catalogs is that many obscure movie titles are never brought to the rental market if studios think demand is too small to sell the vast quantity of discs created in bulk reproduction batches, Swint said. That also stops retailers from taking advantage of the "long tail," the marketing theory that shops can make more money selling small quantities of each niche item than selling a large amount of trendy, short-lived items.

To solve it, HP plans to offer "manufacturing on demand" in the future, opening up a huge catalog of old titles by producing a single disc to meet each online order. HP has started building a factory to do that work, and will add it to their Video Merchant Services package.

In the meantime, Wal-Mart is selling new releases, which become available the same day as the DVD release, for US$12.88 to $19.88. Older movies cost $7.50 and TV programs cost $1.96 per episode. DVD buyers will also have the option of paying an additional fee to download the digital version for playback on PCs and portable devices.