Angry Netflix Customers Turning to Wal-Mart's Vudu?

Netflix customers who got upset last month when the company raised pricing on unlimited DVDs by mail and streaming services by 60 percent may be getting the last laugh with Wal-Mart's Vudu service. Wal-Mart, it seems, has a real hit on hits hands with Vudu, the video streaming and DVD site the company owns and features prominently on the company's main Web site.

A recent report from IHS Screen Digest Media Research shows that Wal-Mart's Vudu has passed by both Amazon and the Sony PlayStation Store in the U.S. in online movie store rankings.

That's a big improvement for Vudu -- attributable both to alienated Netflix customers who've departed, finding alternate ways and places to get movies, and to Wal-Mart's move last month to add Vudu to walmart.com and prominently feature and promote the service.

In the first half of 2010, Vudu accounted for only one percent of the online movie market in the U.S. based on revenue percentage. But in the first half of 2011, Vudu has claimed 5.3 percent of the market, according to IHS Screen Digest Research, as of August 2011.

Vudu came in third place in the rankings behind Apple's iTunes and Microsoft's Zune Video Marketplace. Wal-Mart has tried different Web products, but until Vudu the world's largest brick-and-mortar retailer hasn't had much success. The company is apparently doing some things right with Vudu, however, moving past Sony PlayStation Store (4.4 percent) and Amazon (4.2 percent).

The company's service provides high quality streams of first-run movies sold at a la carte pricing. Unlike Netflix, it's not a monthly membership service. So while research doesn't show Wal-Mart competing head-to-head with Netflix, the company is undoubtedly gaining customers who sought other options as the company increased prices on its unlimited services by 60 percent in July.

Some research after the Neftlix price hike show that as many as 20 percent could leave the company for other options. The company has estimated that figure is too high, however.

Regardless, though, Wal-Mart's a la carte streaming and DVD service, which allows online buyers to order a DVD for in-store pickup and return or have it mailed to their home, is finding a market and growing fast.

Streaming video has been gaining momentum as more people use iPads and other electronic devices to watch TV shows and movies. Apple is reportedly among several companies interested in possibly buying a Hulu, another popular online video service. Hulu's owners include Disney, News Corp. and Comcast Corp.

Wal-Mart's Vudu pricing ranges from $1 to $5.99 per rental or streaming download, depending upon the title.

Previously, Wal-Mart had operated Vudu separately from walmart.com. Wal-Mart bought Vudu last year to gain an entry into the fast-growing segment. Wal-Mart won't say how many customers use Vudu, but it say the number has tripled since Christmas.

Blockbuster offers DVD-by-mail or in stores, but the company doesn't offer streaming video services.