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Originally published Wednesday, November 29, 2006 at 12:00 AM

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Wal-Mart wades into video-download fray

Wal-Mart will test a proprietary video-download service next year and join Apple Computer and Amazon.com in vying for a slice of the fast-growing...

Bloomberg News; The Associated Press

Wal-Mart will test a proprietary video-download service next year and join Apple Computer and Amazon.com in vying for a slice of the fast-growing market.

The retailer Tuesday began selling the "Superman Returns" DVD with a video-download option unavailable at other U.S. retailers, Wal-Mart said Tuesday in a statement.

Wal-Mart's entry into video downloading pits it against established competitors in Amazon's Unbox service and Apple's iTunes Music Store, which already competes with the retailer in online music sales. The market will expand further next year, when video-rental companies Netflix and Blockbuster may start their own services.

"This isn't Wal-Mart's expertise," said Edward Woo, an analyst at Wedbush Morgan Securities in Los Angeles. "They had a chance to wipe out iTunes and that obviously didn't happen. I can't tell you the last time someone said, 'Downloading music? Go to Wal-Mart.' "

Amazon Unbox, unveiled in September, sells downloadable television shows and movies. Apple sells TV shows, music videos and Walt Disney Co. movies through iTunes. Wal-Mart offers music downloads for 88 cents; they are 99 cents at iTunes.

Wal-Mart customers can choose from three download options with the purchase of the "Superman Returns" DVD: $1.97 for portable devices, $2.97 for personal computers and laptops, and $3.97 to cover all such equipment. That compares with $1.99 per episode for television shows through Amazon Unbox and for TV shows and music videos on Apple's iTunes.

The "Superman Returns" DVD will come with a video-download "feature sticker" on the cover. Customers then have to log on to walmart.com/superman, enter the promotional code, and choose the desired download format.

Once users create an account and install the video-download manager, the purchase is completed and the download begins. Customers can begin watching the movie while it downloads.

Wal-Mart closed its online video-rental business in May 2005 and began referring customers to Netflix, the Los Gatos, Calif.-based company that leads online rentals. Now, DVD-rental companies are eyeing the download market.

Netflix plans to develop an Internet download service next year, Chief Financial Officer Barry McCarthy said last month. The company said it would provide specifics in January.

Blockbuster, the world's largest video-rental chain, may start a download service next year, Chief Executive John Antioco said Tuesday at the Reuters Media Summit in New York.

The world's largest media company proclaimed its own download plans Tuesday. Time Warner next year intends to install in-store kiosks that allow shoppers to download films onto DVDs, Chief Executive Richard Parsons said at the Reuters Media Summit. It will probably make the service available at retailers such as Wal-Mart, he said.

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Wal-Mart will test downloads because they are a format customers want, spokeswoman Linda Blakley said Tuesday. The download service test will offer movie and television shows from a variety of studios and television networks. Wal-Mart and Target have pressed studios to sell downloads for the same price as DVDs.

Downloads on Wal-Mart's service can't be played on Apple's iPod, the most popular portable media player, limiting the ways consumers can view the downloaded films, Jupiter Research analyst Michael Gartenberg said.

"It's an interesting short-term promotion to get people on board and try out the service," Gartenberg said. "The question is whether Wal-Mart will be able to do this with every movie. Unless there's a way for consumers to connect these movies to their TV sets or their iPod, Wal-Mart has its work cut out for them."

Wal-Mart is the largest DVD retailer in the country, Gartenberg said, adding that movie downloads haven't been around long enough to gauge the size of the market.

"It's so nascent at this point that you could almost count it on one hand, but not quite," he said.

Licensing deals

for e-developer

BitTorrent, developer of a popular online file-sharing tool, said Tuesday it has reached licensing deals that will boost the number of movies and TV shows it can offer as part of a video-download service launching next year.

The privately held company said it signed agreements with Paramount Pictures, 20th Century Fox, Lionsgate, Palm Pictures and Kadokawa Pictures USA, as well as with cable networks G4, Starz Media, MTV Networks, VH1, SpikeTV, Nickelodeon, Comedy Central and Logo.

Financial terms of the licensing agreements were not disclosed.

Unlike other video-on-demand services, which distribute movies stored on their own servers directly to computer users, BitTorrent uses a peer-to-peer technology that assembles files from separate bits of data downloaded from other computer users across the Internet. The technology makes the distribution of large files faster and less expensive.

BitTorrent plans to debut the commercial video service in February and expects to offer thousands of video titles in addition to music and software.

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