Market Overview

Is Wal-Mart Robbing the Poor to Pay the Rich?


Wal-Mart announced this week that it wants to take your movie collection online. But is it good business? Or a gimmick designed to extract money from clueless consumers?

In previous years, many criticized Wal-Mart (NYSE: WMT) for being a large conglomerate that sells Chinese goods to cheap Americans. These critics somehow believe that if Wal-Mart did not exist, corporations would stop outsourcing their work to China and start making products in the United States again. That couldn't be further from the truth. American companies started outsourcing long before Wal-Mart became one of the nation's largest retailers. As long as there is cheap labor in China, there will be corporate leaders who will to take advantage, all the while telling us that it's not about money, it's about “efficiency.”

Wal-Mart hasn't spent a great deal of time defending the reasons why it sells so many Chinese-made goods, but it's not as if there are many alternatives. Despite the repeated claims that America is still the world's largest exporter, it is very difficult to find American-made goods in this country. Thus, Wal-Mart isn't entirely to blame for the problem.

When it comes to the retailer's latest venture, however, the company is heavily responsible for any issues that may follow. Namely, the fact that it is (to put it lightly) a major rip-off.

Yesterday afternoon, the retail giant announced it was “time to unlock” our DVDs. “The freedom to watch your movies any time, any place is here!” Wal-Mart wrote in an overly enthusiastic press release. “Wal-Mart is giving physical DVD/Blu-ray collections across the country a second life by turning them into digital movies.”

Hmm, that's odd. Since when do DVDs and Blu-ray discs need a “second” life? Aren't they still on the market? Aren't DVD players still being sold? Don't our old DVDs still play like new? Based on Wal-Mart's announcement, you would think that DVDs were obsolete. But not even Netflix (NASDAQ: NFLX) has been able to kill off the disc-based entertainment medium.

“The nation's largest home entertainment retailer is the first to announce an exclusive in-store disc-to-digital service which gives movie lovers the freedom to watch their DVD/Blu-ray collections from Internet-connected devices, including televisions, tablets, smartphones, gaming consoles and more,” Wal-Mart continued in its press release. “The service is powered by VUDU, the industry-leading video streaming service.”

The “industry-leading video streaming service,” eh? That's hilarious. What industry is Wal-Mart referring to, exactly? Last I checked, Netflix (NASDAQ: NFLX) was the leader of streaming video, while YouTube leads the pack of free online videos. After that we have rising stars like Hulu. But I have serious doubts that the average person has used VUDU. You'd be lucky just to find an Average Joe that is aware the service exists.

“Wal-Mart, in partnership with the major Hollywood studios: Paramount Home Media Distribution, Sony Pictures Home Entertainment, Twentieth Century Fox Home Entertainment, Universal Studios Home Entertainment and Warner Bros. Home Entertainment, is increasing the value of movie ownership for its customers,” Wal-Mart added. “Starting April 16th, 2012 in more than 3,500 stores, Wal-Mart customers will be able to bring their DVD and Blu-ray collections to Wal-Mart and receive digital access to their favorite titles from the partnering studios.”

I know what you're thinking: “Louis, you're crazy! That sounds pretty cool!” And maybe it would have been if Wal-Mart had offered the disc-to-digital conversion as a free or super-low-cost service to consumers who legally purchased movies on DVD.

There aren't many of us, you know. Far too many consumers pirate the films they watch. This brilliant comic illustrates some of the reasons why. But despite the hassle of buying legitimate copies of new films, I still do it. Why? Not just because I want to support the men and women who make movies, but also because it's the right thing to do.

Nonetheless, Wal-Mart (along with the aforementioned Hollywood studios) felt the need to take advantage of legitimate – that is, REAL – customers like myself and charge us an additional fee to take those useless DVDs we bought (you know, the same ones Hollywood told us to buy less than a decade ago) and convert them to streaming form.

“Wal-Mart is helping America get access to their DVD library,” John Aden, executive VP for general merchandising, Wal-Mart U.S, said in a company release. “Wal-Mart Entertainment's new disc-to-digital service will allow our customers to reconnect with the movies they already own on a variety of new devices, while preserving the investments they've made in disc purchases over the years. We believe this revolutionary in-store service will unlock new value for already-owned DVDs, and will encourage consumers to continue building physical and digital movie libraries in the future.”

The fees are as follows: $2 for every DVD or Blu-ray disc. If you'd like to convert an old DVD to 1080p streaming, you can do so for $5 per disc.

This is an enormous rip-off. I repeat, an enormous rip-off. Why should I have to pay an additional fee to watch movies I own online? That's absurd. VUDU isn't a monthly service like Netflix or Hulu – it is supposed to be a streaming service that allows consumers to essentially own or rent the movies they are watching. And why should I have to pay an extra fee for something I've already purchased?

The arguments in favor of VUDU are as follows: consumers bought the DVD, not the stream. It costs money to keep movies online, so by paying $2, consumers are buying the right to watch the film anytime they want. Blah, blah, blah.

Here's why that argument does not hold water: like it or not, I already purchased the movies in question! I'm not going to buy them all over again, not even for $2. No excuse in the world will change my mind.

Some of the movies I purchased came with a digital download code. And many of those codes have expiration dates, preventing some consumers from taking advantage of the “free” digital copy they were promised.

Well guess what: VUDU could technically have an expiration date as well. The site isn't guaranteed to run forever. And yet Wal-Mart expects us to pay an additional $2 to $5 to re-purchase movies we already own (movies that, contrary to Wal-Mart's spiel, are not dead and do not require a “second life”). That is nuts.

If a consumer wants to stream a new film that he/she does not already own, that's fine. But I'm hoping that this disc-to-digital strategy is a total failure. Otherwise Wal-Mart will surely find other ways to charge us another set of fees for other versions of movies we already own.

Follow me @LouisBedigian

Posted-In: Vudu Wal-MartTech Best of Benzinga


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