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Walmart Adds DreamWorks As It Bows Disc-to-Digital

23 Apr, 2012 By: Chris Tribbey, Erik Gruenwedel

Walmart’s cloud-based disc-to-digital transfer program enjoyed good news during its first week, adding current and catalog titles from DreamWorks Animation and earning high praise from analysts. Still, there were hiccups, with reports that some stores weren’t ready to offer the service.

The addition of DreamWorks Animation’s major franchises, including “Shrek,” “Madagascar” and “Kung Fu Panda,” came April 16, the first day of the service, adding to the 4,000-plus titles available from Paramount Home Media Distribution, Sony Pictures Home Entertainment, 20th Century Fox Home Entertainment, Universal Studios Home Entertainment and Warner Bros. Home Entertainment.

“Walmart is breaking new ground in helping consumers understand the opportunities of new technologies amid the changing digital landscape,” said Jeffrey Katzenberg, CEO of DreamWorks Animation.

Meanwhile, in a result right out of the “He Likes it! Hey, Mikey” cereal commercial from the ’70s, BTIG Research analyst Richard Greenfield test-drove Walmart’s disc-to-digital service — which launched April 16 in 3,500 stores — and said the experience “exceeded” expectations.

Greenfield, like many Wall Street analysts, had questioned the need for such a service at a time when lower-priced disc rentals flourish at Redbox kiosks and subscription video-on-demand services such as Netflix. Specifically, the analyst believed the required trip to a Walmart store coupled with the $2 fee per standard-definition ($5 for HD) transfer (double what he suggested) and probable tech glitches would be a recipe for disaster.

Greenfield took 10 of his own DVDs to a Walmart in New Jersey and then streamed the content through Vudu on both an iPad and a television connected to a PlayStation 3 video game console. The only title he couldn’t transfer was Gladiator.

“We were really impressed with how quickly we were able to register for a new Vudu account (if we didn’t already have one), how quick/easy it was for Walmart employees to verify a title’s availability (for a DVD we had brought in) and most importantly, how fast the content became available in our Vudu account (under 10 minutes, meaning by the time most consumers get home from their trip to the store, the content will be waiting for them),” Greenfield wrote in an April 20 post.

Under the Walmart service, customers bring their discs to their local Walmart Photo Center, where a staffer will help them create their own free Vudu account. Walmart then authorizes the digital copies and unlocks them in the account. No upload is necessary, and customers get to keep their discs. Customers can log onto Vudu.com from more than 300 Internet-connected devices to view movies any time, any place. Those same titles are then also accessible as UltraViolet files at UVVU.com and other services, including Warner-owned Flixster.

“Walmart’s disc-to-digital service answers our customers’ desire for new and flexible ways to enjoy their movie collections,” said John Aden, EVP for general merchandising with Walmart U.S. “DreamWorks Animation’s existing line-up of blockbuster films is a powerful addition.”

Indeed, adding DreamWorks titles is a boon for both Walmart’s new program and UltraViolet, noted research firm Zacks Equity Research, especially considering the absence of Walt Disney Studios Home Entertainment, which opts instead to be part of Apple’s iCloud movie storage system.

“We believe this initiative is expected to boost Walmart’s lackluster movie sales, which have been declining due to the presence of other forms of entertainment and online alternatives,” the firm wrote in a research note. “With the digital access, customers are now able to reconnect with movies anywhere on a variety of new devices.”

A Walmart spokeswoman said the retailer was “encouraged” by the week-one results of the disc-to-digital program. However, despite its goal of launching the program in 3,500-plus stores, there were numerous reports that the program was off to a shaky start at some stores.

“My local Walmart had no clue why I was there or what I was talking about,” one Vudu.com user wrote on that website’s forum. “I called another Walmart and could not get a hold of anyone who knew about the program. I called a third even farther Walmart and was told by the photo center guy that he ‘thinks’ they do it there. I’m not driving 30 minutes for ‘I think.’”

Another Vudu.com customer said Photo Center employees at his local Walmart knew nothing of the program “or even knew what Vudu was, even though there are plenty of banners posted promoting the new service.” A manager eventually told him that the location was not ready to offer the service.

Vudu representatives reassured users on the site that they were aware of some issues and were working to correct them.

Ben Drawbaugh, high-def editor for Engadget.com, said he’s heard similar hit-or-miss stories, and he himself had to try two different Walmarts before finding one that would do the transfers. But once he did get 18 titles transferred, the experience was gratifying, he said.

“Overall I think it is going to be a pretty successful service, once all the stores get on board,” Drawbaugh said. “For one, Blu-ray bundles with digital copies typically cost more than $2 more than those without. Two, being able to upgrade a DVD to HD for $5 is a good deal compared to throwing it away and buying the Blu-ray — although I wish DVD to Blu-ray offers were expanded.”

He added that it was good to see his titles show up on other devices via UltraViolet and Flixster.

Flixster is doing its part to garner more users for UltraViolet, recently launching a movie “Gift-a-Thon,” offering users free Warner movies from Warner for “liking” Flixster on Facebook, tweeting about the service on Twitter or referring friends to the service.

Meanwhile, citing unnamed sources, Variety reported Vudu is getting ready to expand into as many as 30 Latin American countries in June. Walmart plans to expand Vudu into Europe and Asia this year as well, the magazine reported.

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