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By now, you must have heard of Walmart's (NYSE:WMT) intention to enable movie downloads via the Internet. Needless to say, this has generated a lot of buzz and publicity for Walmart.

Without further ado, I want to make my opinions clear on this move by Walmart. Like their DVD rental service two years ago that would supposedly topple the likes of Netflix (NASDAQ:NFLX) and Blockbuster (BBI), this is a desperate attempt by Walmart to ignite their image and stock price. In other words, it will not impact those that Walmart is targeting - namely Apple (NASDAQ:AAPL), Netflix and Blockbuster. If anything, by doing so, Walmart might end up cannibalizing their own successful DVD sales.

Firstly, lets look at what Walmart is offering - which is a downloadable movie library of 3000 plus titles that will allow users to download new and old movies via the Internet to their computer. These movies would cost anywhere from $5.00 for old and unwanted titles to $20 for newer flicks. Let me punch some holes into this model:

• People do not like to watch movies on their computers.

• Why would you download a movie and be restricted to watching in on your PC when you can buy the physical copy in a store or online for the same price? You can then watch the movie without restriction on a PC, on a 50" plasma TV screen with surround sound or take it to a friends house for everyone at the party to watch.

• A typical movie would require 500 MB or more space on your hard drive. Downloading such large files can cause many problems to your PC - I know because I have faced these problems. Not only that, such movie downloads would take at least a couple of hours over a fast broadband connection. Modem and slower speed DSL users can forget about it.

• Consumers who do like to use the Internet as a movie download might be inclined to use cheaper services like CinemaNow or Movieflix. MovieFlix charges $7.95 per month for unlimited movies, while CinemaNow charges $1.99 for rentals, and anywhere from $10 to $20 for movie purchases. In addition to these services, these sites also offer members only downloadable content, and niche-based content like independent films.

• Companies like Apple and Microsoft (NASDAQ:MSFT) have better models with their Apple TV and XBox 360, which can be used to download movies via their respective services (iTunes and Live). These movies can be watched on television, in hi-def and while they either have restricted viewing and/or proprietary formats, at least they can be viewed on TV sets rather than just on PC's.

As you can see, Walmart is grasping at straws as they try to create shareholder value by testing new waters. Unfortunately, they are entering an arena that is already dominated by other players. Each of these players give their users a distinct advantage that Walmart simply cannot provide:

Netflix - a library of over 70,000 titles (last I checked but it might have changed by the time I finish writing this post). Fast delivery. Great service. Unlimited downloads for a flat price.

Blockbuster - Total Access means you never have to be without a movie. No waiting for movies to arrive in the mail - simply exchange the online rentals in store for in-store rentals. In addition, get a Free Game or Movie every month.

CinemaNow/MovieLink - As outlined above, these are limited usage rental downloads but are cheap. Those who want to purchase can also do so. This purchase model is something Walmart is looking to emulate.

Apple/Microsoft - At the risk of being shunned by my readers by putting these names side-by-side, the service is similar. While we have yet to see the Apple TV, initial previews indicate a replica of iTunes for your TV. With millions of people already registered and active on iTunes, Apple has the distinct advantage of a captive audience. Microsoft however, has its own advantages - offering HD-DVD and regular DVD format downloads for XBox 360 owners. They have a captive audience too - that of their XBox Live community.

Amazon/Tivo - Almost a year after quelling the hype over their Online DVD rental service, Amazon has finally come up with a way to make their customer base and their online brand work for them. By pairing up with Tivo and offering video downloads through Tivo set top boxes, Amazon will have instant access to almost 5 million Tivo households.

There are other losers in this arena - I am not convinced the Amazon/Tivo partnership will come to fruition. CinemaNow and Movielink too, despite being around for a while, have not exactly attracted the volumes they had hoped for, and Blockbuster vs. Netflix is a battle that will rage on for quite some time.

So from a money-making perspective, readers who follow my picks know I have liked Apple and Blockbuster for some time. I believe Microsoft is another one that will do well for investors, although the company is primarily focused on business applications and is too large for me to actively invest in. One thing is for sure. Walmart will not have any impact on any of the services mentioned above and those investing in Walmart for this reason should think twice.

Part 2 of this series will discuss winners of these media wars including search engines, media conglomerates, cable operaters etc. Stay tuned ...

Full Disclosure: I own BBI and am short AMZN, but have no positions in AAPL, NFLX, TIVO, MSFT or WMT at this time. However, my positions might change anytime without notice.

Source: Movie Download Wars: Wal Mart Grasping at Straws