Wal-Mart Video Downloads End Quietly

Hilarious bit of marginalia in the Internet movie downloads market, especially following yesterday’s reports that Apple (AAPL) and News Corp.’s (NWS) 20th Century Fox may collaborate on online video rentals.

Reuters reports that Wal-Mart’s (WMT) fledgling movie download service, less than a year old, was shut down on Dec. 21, apparently without anyone noticing.

A sign posted on Wal-Mart’s Web site makes no explanation of the shutdown, but Reuters quotes Wal-Mart as saying that Hewlett-Packard (HPQ), the technology partner in the deal, withdrew the technology used to support the downloads. Somehow I suspect there’s more to it than that. Reuters notes that TechCrunch ’s skeptical attitude when the service was rolled out turned out to be accurate. Said TechCrunch, “None of these companies [Apple’s iTunes and others] are going to lie down in the face of competition from Walmart, and they know that Walmart will bail out of markets that they can’t dominate.”

And the hilarious part? Tech blog Gizmodo notes that the few, the proud who used Wal-Mart’s service are entitled to keep their movie purchases for as long as they like, providing, as Gizmodo puts it, “you keep the same computer for life,” because movie downloads are linked to the computer with which they were downloaded.

Can you say “8-tracks”?

Caveat emptor to those tempted to jump into new online services with dubious prospects.

Comments

[Brewer]

Apple will not only own the video rental market by this time next year, but Windows Media will be a failure when fareplay makes it onto virtually all DVDs. That's great because WIndows Media, and the name implies, is only there to bind you to Windows, and Windows is a dead-end operating system.

[Kontra]

In a frenzy to catch up with Apple, the industry hasn’t learned much from the PlaysForSure debacle by watching Microsoft abandon its own DRM and introduce Zune with a new and incompatible system to compete directly against its erstwhile digital music “partners.” In another instance of mortgaging success to others’ willingness or ability to innovate, AOL recently moved its struggling video service to Amazon Unbox which in turn is based on Microsoft’s PlaysForSure.

The irony here is that Wal-Mart relied on HP that relied on Microsoft and AOL relies on Amazon that relies on Microsoft which itself no longer relies on its own PlaysForSure. When a core component of a product or service depends on the rate of innovation of another party over which you have no control or influence, it’s time to rethink strategy. It’s also time to ask yourself, twice or thrice removed from core competency, should you really be in such a business?

Strategic design risks (1): Wal-Mart’s foolhardy reliance on “partners”
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