Walmart taps MGM, startup to beef up its streaming video service

Walmart is wading in to the world of original streaming TV. But will anyone watch it?

The retail company says it is partnering with the movie studio MGM to make new shows for Walmart’s streaming service, Vudu, starting with a new version of the 1980s comedy film “Mr. Mom” that will debut early next year.

It’s the first of two new partnerships for Walmart, which also announced a deal Thursday with the video startup Eko to make additional “original, interactive content.” Original shows from other companies could come in the future, too.

The deal follows months of speculation about whether Walmart (WMT) would make a major play in streaming video, like rival retailer Amazon (AMZN) has with Prime Video. Earlier this summer, The Wall Street Journal and Variety reported that Walmart was considering its own video subscription service.

While this week’s announcements don’t appear to be as ambitious as what was suggested in those reports, it is still the most significant push Walmart has made with streaming in years.

Walmart bought Vudu back in 2010, when Netflix (NFLX) was still finding its footing and before Amazon began investing in original content.

But Vudu hasn’t evolved in the ways that those platforms have. It is supported by ads, not subscription dollars, so it is largely free to use. Walmart added a feature a couple years ago that offers a few thousand movies and TV shows to watch at no charge. The service also gives customers the ability to buy and stream other titles.

These new deals suggest Walmart wants to at least test whether it has a future in entertainment.

Joel Espelien, a senior adviser at The Diffusion Group, a media research firm, called the MGM deal an “awesome marriage of convenience.”

MGM is a storied production studio responsible for franchises such as “James Bond” and “Rocky.” But it is much smaller than it used to be and needs to find new ways to get its library of movies in front of viewers, he said Wednesday.

Through Vudu, Walmart has the ability to distribute to a large audience. But Espelien added that the company needs unique content if it wants to make its proposition more attractive to customers.

Espelien pointed out that Walmart’s approach probably won’t be comparable to the way Amazon uses entertainment. That company’s video service is an extra perk for subscribers to the Amazon Prime program — in other words, a hook for people who are looking to justify an annual $119 membership.

Walmart, meanwhile, is known for its “Everyday Low Prices” and customer base of low- and middle-income Americans. Espelien said Walmart would have an easier time if it keeps trying to sell them on a service that doesn’t cost money.

The retailer is already detailing ways it can leverage Vudu for marketing. At a conference in Los Angeles on Wednesday, Walmart said customers will be able to click on ads while they are watching Vudu. The ads won’t interrupt the show they are watching, but instead clicking the ad will prompt an email with more information.

Walmart added that its customer data will allow it to send targeted advertisements.

If Walmart can drive more store traffic from Vudu customers, the company’s investment in streaming could pay off, Espelien said.

Not everyone sees the appeal of a Walmart-branded streaming service.

“I’m a little bit puzzled,” said Barton Crockett, a senior analyst at B. Riley FBR. He said video is already a crowded market, with loads of other streaming services competing for everyone’s time.

The market got even more crowded on Wednesday when AT&T’s (T) WarnerMedia (CNN’s parent company) announced that it will launch its own direct to consumer streaming product in late 2019. And while Walmart hasn’t disclosed the financial terms of its new deals, the partnerships looks small compared to what other companies are spending to bring in viewership.

Crocket said that if Walmart was serious about streaming video, it could have done something with Vudu a lot sooner. Now the bar for creating a streaming platform built around original content is very high, making it hard to see the appeal of this new venture.

“They did nothing, and now these other guys are huge,” Crockett added. “It really just seems to be a flea on an elephant’s backside.”

Crockett said Walmart should instead lean into its strengths. The retail company has boasted strong numbers this year, even against titanic competition from Amazon. During its most recent earnings quarter, for example, Walmart reported its best US sales growth in more than a decade. Digital sales were up 40%.

Walmart isn’t a content company, Crockett said — nor has it ever been one.

“Don’t try and pretend to be something that you’re really not, right?” he added.