Wal-Mart Enters the Crowded DVD Download Market

Wal-Mart's (WMT) highly-anticipated movie-download service was announced Tuesday, about a month after Netflix (NFLX) launched its movie-streaming service, and four months after Amazon's (AMZN) movie-download service called unBox was launched. Apple (AAPL) started selling movies online in September 2006, and selling video-services and TV shows, like "Desperate Housewives," in September 2005.

The question is: How long will Wal-Mart last in this competitive space? After all, Wal-Mart conceded defeat in May 2005, after it shuttered its DVD-subscription service and decided to promote Netflix's service instead. At the time, it's estimated Wal-Mart had between 100,000 and 200,000 subscribers, placing the Arkansas retailer a distant third behind Netflix - with more than 3 million subs, and Blockbuster (BBI) -- with more than 750,000 subs. Wal-Mart doesn't promote Netflix's DVD-rental service any longer.

To be sure, Wal-Mart's online download service kicks off with 3,000 movie titles. Not a bad number to start with. Netflix started with 1,000, or less than 2% of its 70,000 title. Netflix spokesman Steve Swasey told me that Netflix expects to have 5,000 titles available for rental by yearend.

But Wal-Mart's pricing isn't exactly what I'd call compelling. New movie releases will be available for video download on the day of the DVD release and will range from $12.88- $19.88. Catalog titles start at $7.50 and TV shows at $1.96 per episode. Netflix's prices are free -- for those who are already DVD rental subscribers. And, one thing that Wal-Mart's service appears to lack is a recommendation engine. Netflix has said that 60%of its movie rentals come from its powerful recommendation engine, Cinematch. Additionally, Wal-Mart's service doesn't work on Firefox, which is my favorite browser.

Another final point, Wal-Mart isn't exactly competing with Netflix because Wal-Mart isn't renting videos the way Netflix is. In fact, most sites - Apple, Amazon, CinemaNow, Google (GOOG) - are selling videos. Or in the case of YouTube, they're just allowing people to watch for "snippets" for free. Netflix appears to be the only service that is banking on DVD rentals as a business model.