Streaming partnership with MGM kicks off a new era for Walmart

Walmart (WMT) might not have ever considered diversifying its business to video-on-demand service unless arch-rival Amazon (AMZN) had successfully proved that retail business and streaming could go hand-in-hand. For the store operator, it’s going to be a busy holiday season this time, when the spotlight is expected to shift to its entertainment arm Vudu.

The agreement signed between Vudu and MGM studio this week will surely be a game-changing development as it would give the retailer a competitive advantage over Amazon in the long run, while also creating shareholder value. The financial terms of the deal are not known yet.

After joining the Walmart fold about eight years ago, Vudu has been striving to make its presence felt in the streaming space dominated by Netflix (NFLX). Come the fourth quarter, Vudu will start its video-on-demand service offering original content for the first time.

The agreement will be a game-changer as it will give the company a competitive advantage over Amazon in the long run

The free-to-air shows, licensed for viewing in the US and Canada, will be produced by MGM based on its ongoing franchises. Walmart is planning to focus on the untapped markets, including customers living in the suburbs.

According to sources, it is just the beginning for the company that is planning more licensing partnerships and acquisition of original content in the future. Meanwhile, a statement from Walmart shows currently it is not planning a huge investment in content acquisition.

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Contrary to reports appeared in the media earlier, Vudu does not intend to try its hand at the production of TV shows, which is a very costly affair compared to licensing. Now, what needs to be seen in how effectively will Vudu be able to compete with streaming majors like Netflix, HBO and Prime, who spend several billions of dollars on content and programming.

The arrangement is expected to be accretive to Walmart’s earnings in the long term, considering the ad-driven revenue model and exclusivity of the shows, designed primarily for the family audience. The first series to be brought out under the partnership will be announced later this week.

Once again, Walmart is following its usual method of introducing new services in a phased manner, rather than making a full-fledged entry. The strategy allows the company and its shareholders to make decisions after weighing the prospects. Walmart shares ended the previous trading session lower and slipped further in pre-market trading Monday.

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