New store openings in the U.S. and abroad have driven 5 per cent average sales growth over five years at Wal-Mart. Yet gross margins have barely improved over that period.
Walmart has moved to speed the transition from DVD to digital viewing of movies by launching a service that will convert the film collections of its customers to cloud-based files that can be streamed or downloaded to any device.
The retailer announced a partnership on Tuesday with five studios that was hailed as a boost to UltraViolet, the cloud-based locker system that the studios hope will return home entertainment sales to growth.
Warner Brothers, Paramount Pictures, Universal Studios, Sony Pictures and Twentieth Century Fox have all signed up to participate in the Walmart scheme. They are among the companies backing UltraViolet, which is designed to allow consumers to store their film collections in the cloud and view them on any connected device.
However, UltraViolet has been slow to take-off and consumer reviews have been mixed. Bob Iger, the chief executive of Walt Disney – which is not participating in UltraViolet – recently said UltraViolet was "not as robust as we expected or as consumer friendly as we hoped."
Rival cloud-based services have also been slow to take off. Apple, the largest seller of digital movies, recently unveiled its own cloud-based film service. But the company has not been able to strike deals with Universal Pictures and Twentieth Century Fox because of complicated contracts with HBO, the Time Warner-owned pay TV channel, that prevent the licensing of streaming rights.
This has failed to dent enthusiasm for cloud-based lockers and with Walmart on board as UltraViolet's first big retailing partner, the studios gathered at a Hollywood press conference on Tuesday were optimistic that the new service would succeed. "This is an important step for Hollywood," said David Bishop, president of Sony Pictures Home Entertainment. Walmart would use its "marketing muscle" to promote UltraViolet, he added.
Walmart consumers will be encouraged to bring their DVD and Blu-ray collections to Walmart's 3,500 stores across the U.S. Standard DVDs will cost $2 to convert to cloud-based files, while a $5 fee will apply to upgrade the discs to a high-definition format.
Mr. Bishop expressed confidence that consumers would be willing to pay fees to convert DVDs that they had already acquired. "The studios all did consumer research around this and the in-store activity will prove out that research," he said. "We are confident that consumers will see the value [of the service]"
The Walmart 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," said John Aden, executive vice-president for general merchandising at Walmart.
Walmart sells more movies than any other retailer in the U.S. But sales have dipped as consumers have drifted away from the format towards other forms of entertainment and online alternatives.
The retailer wants to use the disc-to-digital conversion to power Vudu, Walmart's streaming video service, which is available on Internet-connected television sets, Sony PlayStation devices and Microsoft Xbox consoles.